TMI Blog2014 (6) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof - there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year - 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 - 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 AY 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 forward and se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore than eight assessment year immediately succeeding the assessment year for which the aforesaid allowance was first computed. In view of the I.T. Provisions and decision mentioned above, the assessee was entitled to carry forward the unabsorbed losses up to the prescribe time limit i.e. 8 years only i.e. upto A.Y.2008-09. Thus, the brought forward unabsorbed depreciation of Rs.1,19,78,728/- allowed to be carried forward to next year was contrary to the provisions as stated above. Therefore, I have reason to believe that excess carry forward loss to the above extent is escaped assessment within the meaning of section 147 of the I.T. Act, 1961. On 7.2.2014, the petitioner filed its objections to the notice for reopening. Such objections were dismissed by the Assessing Officer by an order dated 6.3.2014. Hence this petition. Learned counsel for the petitioner contended that from the record it emerges that the sole ground on which the Assessing Officer desires to reopen the assessment is that unabsorbed depreciation could not be carried forward beyond the period of eight years. Assessment year 2008-09 not being the year within such time limit, the assessee could not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st question which arises for consideration is that whether the unabsorbed depreciation pertaining to A.Y. 1997- 98 could be allowed to be carried forward and set off after a period of eight years or it would be governed by Section 32 as amended by Finance Act 2001? The reason given by the Assessing Officer under section 147 is that Section 32(2) of the Act was amended by Finance Act No.2 of 1996 w.e.f. A.Y. 1997- 98 and the unabsorbed depreciation for the A.Y. 1997-98 could be carried forward up to the maximum period of 8 years from the year in which it was first computed. According to the Assessing Officer, 8 years expired in the A.Y. 2005-06 and only till then, the assessee was eligible to claim unabsorbed depreciation of A.Y. 1997-98 for being carried forward and set off against the income for the A.Y. 2005-06. But the assessee was not entitled for unabsorbed depreciation of Rs.43,60,22,158/- for A.Y. 1997-98, which was not eligible for being carried forward and set off against the income for the A.Y. 2006-07. 31. Prior to the Finance Act No.2 of 1996 the unabsorbed depreciation for any year was allowed to be carry forward indefinitely and by a deeming fiction became allowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years immediately succeeding the assessment year for which the aforesaid allowance was first computed: Provided that the time limit of eight assessment years specified in sub-clause (b) shall not apply in case of a company for the assessment year beginning with the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Company (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year relevant to the previous year in which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.- For the purposes of this clause, net worth shall have the meaning assigned to it in clause (ga) of subsection (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985. 34. The aforesaid provision was introduced by Finance (No.2) Act, 1996 and further amended by the Finance Act, 2000. The provision introduced by Finance (No.2) Act was clarified by the Finance Minister to be applicable with prospective effect. 35. Section 32 (2) of the Act was amended by Finance Act, 2001 and the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 depreciation. The amendment is applicable from assessment year 2002-03 and subsequent years. This means 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 not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in A.Y. 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect.However, it does not contain any such provision. Hence keeping in view the purpose of amendment of section 32(2) of the Act, a purposive and harmonious interpretation has to be taken. While construing taxing statutes, rule of strict interpretation has to be applied, giving fair and reasonable construction to the language of the section without leaning to the side of assessee or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 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 forward and set off against the profits and gains of subsequent years, without any limit whatsoever. In the said case also, the Court was examining the validity of reopening. Of course, such notice was issued beyond the period of four years from the end of the relevant assessment year. Nevertheless, when the ground on which present notice is founded is held to be invalid in law, in our opinion, the very foundation for issuance of notice would not survive. In the result, the impugned notice is quashed. Before closing, we would touch one aspect of the matter of general implication. Prior to the decision of the Supreme Court in the case of GKN Driveshafts (India) Ltd v. ITO, 259 ITR 19 the assessees were not supplied with the reasons recorded by the Assessing Officer for reopening the assessment. The Supreme court in the case of GKN Driveshafts (India) Ltd. (supra), issued certain directions giving rights to the assessees to demand the reasons and raise objections to the proposal of the Assessing Officer to reopen the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing 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 3707 3708/14 23/08/12 21/09/12 12/10/12 06/05/13 17/02/14 4107/14 04/10/12 09/11/12 Not available 21/01/14 07/03/14 3679/14 28/03/13 25/04/13 18/09/13 20/11/13 30/12/13 3275/14 25/03/13 04/04/13 19/09/13 26/09/13 10/02/14 4074/14 07/03/13 18/03/13 25/03/13 24/12/13 03/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 hereinabove, the Assessing Officer would dispose of the objections, as far as possible, within fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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