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TMI Blog2023 (4) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... aim 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect Pottery Co. Ltd. v. CIT [1987] 166 ITR 196 (Ker);S.P.V. Bank Ltd. v. CIT [1980]126 ITR 773 (Ker); and International Marketing Ltd. v. ITO [2007] 292 ITR 504 (Del), he held that it is only where a business is in existence that it s profits and gains, allowing expenditure incurred for it s purposes, could be computed. Income, accordingly, was assessed at Rs. 35,85,037, i.e., without allowing any claim qua unabsorbed business loss or depreciation. In appeal, the ld. CIT(A) upheld the same in principle, holding as under after a detailed discussion on the various aspects of the matter, allowing part relief: 7. In sum, the Appeal for the impugned A.Y. 2011-12 is partly allowed. The amounts of unabsorbed depreciation brought forward from the AYs 1996-97 and 1997-98 (Rs. 34,29,210 and Rs. 28,36,165 respectively) are allowed to be set off against the taxable incomes of the AYs 2010-11, 2011-12 (the impugned Assessment Year) and following years. The remainder amounts that relate to the AYs 1998-99 to 2009-10 are disallowed from being brought forward and set off in the AY 2010-11, the impugned AY 2011-12 and for the succeeding AYs 2012-13 onwards untill (as stated above based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble High Court which, vide it s judgment dated 17/11/2021 (in ITA No. 11/2018), set aside the Tribunal s order, holding as under: 11. We have anxiously considered the rival submissions made at the Bar. On going through Annexure D, it is evident that the appellant challenges the order of the first appellate authority on the ground that the first appellate authority exceeded its jurisdiction which was limited to the assessment year 2011-12 and by giving direction or (of) re-opening the assessment for the years 2010-11 and 2012-13 onwards, was without jurisdiction. On going through the order of the Tribunal, we have noted that the grounds raised by the appellant mentioned above was taken note of, but the said contention was not answered by the Tribunal for the reason that the issue before the Tribunal was only in respect of the assessment year 2011-12. The Tribunal did not go into the grounds raised by the appellant in respect of the direction given by the first appellate authority to the Assessing Officer to re-open the assessment for the years 2010-11 and 2012- 13 onwards. According to us, the Tribunal ought to have answered the said question, but failed to do so. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 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? 4.2 Our first observation in the matter is that there is nothing on record; in fact, not even a contention to that effect at any stage, of the assessee having returned the income for the intervening years, i.e., prior to AY 2010-11, for it to contend that the ld. CIT(A) could not have given a finding for the AO to reopen assessments which had attained finality. The merits of the argument apart, it is made without any factual basis. This is as only a regular assessment or processing u/s. 143(1) of the Act for the intervening years, to which the claim pertains, would justify the contention raised. 4.3 Our second preliminary observation in the matter is that if information sourced from another wing of the Department, as was the case, inter alia, in ITO v. Purushottam Das Bangur[1997] 224 ITR 362 (SC);Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662 (SC); Brij Mohan Agarwal v. Asst. CIT [2004] 268 ITR 400 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he actual denial of set-off takes place. This, it may be noted, is precisely what the Tribunal had held in the first instance. 4.5 The direction by the ld. CIT(A) to the AO in the facts of the instant case, on the contrary, is not, as is being construed, for making a disallowance for any other year (i.e., other than AY 2011-12, the year under appeal before him), but only to, given his factual findings, consider taking remedial course by reopening the assessments for the years impacted by the assessee s claim for UAD for the earlier years. The reopening for those years is liable to be challenged, and would have to be justified, both on facts and in law, on the anvil of reason to believe . The impugned direction, being based on findings by the ld. CIT(A) for the current year, could even otherwise, i.e., in the absence of such a direction, be taken cognizance or judicial notice of by the AO for causing the reopening of the assessments for those years. That is, does not prejudice the assessee in any manner inasmuch as the AO could, even independent of such a specific direction, proceed in the matter of initiation of reassessment proceedings. There is no enhancement by the ld.CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings of the ld. CIT(A). He has made an exhaustive study of the matter, to none of which the assessee responded. There is nothing on record to show that the assets of the company on which depreciation is being claimed, even the details of which, much less their operative status, are conspicuous by their absence, were (being) kept in a state of readiness for being used so as to qualify, assuming so, for an allowance of depreciation. The argument of ready-to-use state, which has factual and legal aspects to it, is understandable in a scenario of a temporary disruption of business, justifying keeping them in a ready-to-use state. The assessee having discontinued it s business, maintaining, if at all, skeletal staff, it s claim is both paradoxical and dichotomous, wholly inconsistent with the factual matrix of the case. Though strictly speaking not required to in view of the non-challenge to the findings by the first appellate authority, much less with any credible material, as observed by the Bench during hearing, much less in a state of readiness, given the non-incurring of any expenditure for the purpose, i.e., on their regular maintenance and upkeep, even the existence of the asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y created by the Act, was no higher than that of the ITO, i.e., also confined to the year of assessment. It further went on to explain and dilate on the concept of finding and direction in section 34(3) of the said Act. It is only a finding necessary for the disposal of the appeal in respect of an assessment for a particular year that can be regarded as such. And, accordingly, the direction to give effect thereto as the direction under contemplation u/s. 34(3), which the appellate authority was therefore empowered to give. It may be, it noted, that the assessing authority may, on evidence, hold that the income shown by the assessee was not the income for the relevant year and thereby exclude that income for the assessment of that year. The finding in that context was that the income did not belong to that year. The incidental finding that the income belonged to another year, being not necessary for the disposal of the appeal in respect of the year of assessment, could not therefore be regarded as a finding within the meaning of section 34(3). The notice under section 34(1)(a) (corresponding section 148(1) of the Act) for bringing the escaped assessment to tax for AY 1948-49, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bundantly clear that even the satisfaction of the conditions for the claim of depreciation on the assets of the erstwhile business for the current year, i.e., where they were actually put to use for any business carried out during the year, or kept in a state of readiness for the same, would imply a claim on the basis of the obtaining written down value of the relevant assets, i.e., actual cost less the depreciation actually allowed. Further still, while, it is true that the assessee is not impacted or prejudiced thereby, i.e., non-allowance of claim of carry forward of unabsorbed depreciation, which would, as explained in Manmohan Das(Decd.) (supra), stand to be disputed in the year of non-allowance of set off, the moot point is if there is indeed a claim of depreciation for the earlier years inasmuch as the question of carry forward of unabsorbed depreciation would arise only in that case. That is, the question of set-off of unabsorbed loss or depreciation is unfounded, which would stand to arise only where the depreciation had indeed been claimed and determined for an earlier year, being for AYs. 1998-99 to 2009-10. The whole exercise is rendered academic, and of little conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, onwards, save of course the current year. The same stands challenged before us as without jurisdiction, being limited only to the year under appeal. Valid in principle, we find the assessee s challenge without any factual or legal basis. True, unless a finding involving another year is necessary for the disposal of the issue before him, an appellate authority has no jurisdiction to issue directions for another year, i.e., other than that under appeal before him. Where, however, one may ask, is question of carry forward of any claim (for an earlier year) when there is no claim, much less an assessment or determination, for an earlier year? 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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