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TMI Blog2018 (2) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... section 154 was passed on 23.3.2010. Thereafter, the ld.AO has issued a notice under section 148 on 13.02.2012 and reopened the assessment. Only basis for which the assessment order was reopened by the AO was that the assessee has unabsorbed depreciation of Rs. 6,18,58,111/- for the Asstt.Year 1997-98 and this brought forward unabsorbed depreciation was eligible to be brought forward for eight assessment years starting from Asstt.Yar 1998-9 i.e. upto the Asstt.Year 2005-06. The AO was of the view that this unabsorbed depreciation of asstt.Year 1997-98 was wrongly brought forward to and set off against the income of Assessment year n2006-07. According to the AO, there was an amendment by Finance Act, 2001. Prior to that, the assessee could claim allowance of unabsorbed depreciation upto 8 years. Thus, the time limit of 8 years for the carry forward and set off of such unabsorbed depreciation started from Asstt.Year 1997-98, would expire in the Asstt.Year 2004-05. The assessee cannot claim set off of such unabsorbed depreciation pertained to the Asstt.Year 1997-98 the Asstt.Year 2006-07. On account of this interpretation of law, he reopened the assessment and issued notice under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation given set off in A.Y. 2006-07 is hereby withdrawn and total income of the assessee is recomputed as under: Total income as per order u/s 250 of the I.T. Act dated 30.10.2009 before adjustment of brought forward business losses and unabsorbed depreciation 22,87,69,135 Less: 1) Brought forward unabsorbed depreciation of A.Y. 98-99 5,78,12,779 2) Brought forward unabsorbed 4,65,23,357 depreciation for A.Y. 99-00 3) Brought forward unabsorbed 3,78,88,662 depreciation for A.Y. 00-01 4) Brought forward unabsorbed 3.40,89,996 17,63.14.794 depreciation for A.Y. 01-02 5,24,54,341 Less: Unabsorbed depreciation for A.Y. 2002-03. 3,50,41,868, 3,50,41,868 Revised Total Income 1,74,12,473" Recalculate tax. Give credit of pre-paid taxes, after verification. Charge interest u/s 234B, 234C and 234D of the IT Act, if applicable. Issued demand notice and challan accordingly." 5. Thus, the construction of provision viz. section 32(2) at the end of the ld.AO is against interpretation made by the Hon'ble jurisdictional High Court in the judgment of General Motors India P.Ltd. (supra). Before averting to the reasoning given by the AO, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er clause (ii) of sub-section (1) in any previous year owning to there being no profits or gains chargeable for that previous year or owing to the profits or gains being less than the allowance, then, the allowance or the part of allowance 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to depreciation 30.1 Under the existing provisions of section 32 of the Income-tax Act, carry forward and set off of unabsorbed depreciation is allowed for 8 assessment years. 30.2 With a view to enable the industry to conserve sufficient funds to replace 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of the profits of that business, then such excess comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any 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 dispen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y restriction of limitation of years. Thus, the issue is squarely covered in favour of the assessee. We do not find any error in the order of the ld.CIT(A) as far as second fold of contention is concerned. 7. As far as first fold of contention is concerned, we find that notice under section 148 was issued on 13.2.2012 i.e. after expiry of 4 years from the end of the assessment year. There was a scrutiny assessment under section 143(3) of the Act. Proviso appended to section 147 puts a restriction on the powers of AO to reopen the assessment by issuance of notice under section 148 in the cases where 4 years have expired and scrutiny assessment under section 143(3) was made. In such cases, unless, the income of the assessee has escaped from the assessment on account of failure of the assessee to disclose all material facts fully and truly, no notice under section 148 could be issued. In the present case, all these facts were also in the knowledge of the AO when he passed the assessment under section 143(3). There is no failure at the end of the assessee. Therefore, the ld.CIT(A) has rightly held that reopening of the assessment is bad in law. Taking into consideration all these fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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