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2013 (4) TMI 766 - AT - Income TaxRevision u/s 263 - CIT directing the Assessing Officer not to allow carry forward and set off of unabsorbed depreciation - rectification of mistake - Held that - On the perusal of the order passed by the CIT it becomes clear that he has not disturbed the set off of brought forward unabsorbed depreciation of Rs. 93, 63, 019/- from the income of the assessee. The CIT has only modified the order of the Assessing Officer to the extent of allowing carry forward of unabsorbed depreciation of 55, 52, 124/- to the subsequent assessment year as it is beyond 8 years. Furthermore the department has no remedy against an order passed u/s 154 of the Act excepting invoking the revisionary power u//s 263 of the Act. In aforesaid view of the matter we hold that the order passed by the CIT is valid in law and accordingly the same is confirmed. Contention of the learned AR that the order passed u/s 263 is barred by limitation is not acceptable. The contention of the learned AR that the time limit to initiate proceedings u/s 263 is from the order u/s 143(3) is not correct. Sub-section (2) of Section 263 makes it clear that no order u/s 263 shall be made after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. In the present case the order u/s 154 was passed on 17-3- 2010. Hence the order passed u/s 263 of the Act is within the period of limitation. In view of our finding hereinabove that there was no mistake apparent on the face of record which could have been rectified by the Assessing Officer and no separate adjudication is required with regard to it - Decided against assessee.
Issues Involved:
1. Validity of CIT's order under section 263 denying carry forward and set off of unabsorbed depreciation. 2. Whether the issue of unabsorbed depreciation is debatable and contentious. 3. Impact of amendment to section 32(2) by Finance Act, 2001. 4. Whether the order under section 263 is barred by limitation. Detailed Analysis: 1. Validity of CIT's Order under Section 263: The assessee contested the CIT's order under section 263, which directed the Assessing Officer (AO) not to allow the carry forward and set off of unabsorbed depreciation. The CIT, upon examining the records, found that the AO had erroneously allowed the carry forward of unabsorbed depreciation from the assessment year 1996-97 beyond the permissible period of 8 years. The CIT argued that the AO's order was erroneous and prejudicial to the interests of the revenue. The CIT issued a notice to the assessee to show cause why the order should not be revised. The assessee contended that the restriction of 8 years was removed by the Finance Act, 2001, and thus, the unabsorbed depreciation could be carried forward indefinitely. However, the CIT relied on the Special Bench decision in the case of Times Guarantee Ltd., which upheld the 8-year limitation for carrying forward unabsorbed depreciation. Consequently, the CIT modified the AO's order, treating the unabsorbed depreciation for the assessment year 1996-97 as nil. 2. Debatable and Contentious Issue: The assessee argued that the issue of unabsorbed depreciation was not debatable or contentious as it was allowed based on the Income-tax Appellate Tribunal's (ITAT) order for the assessment year 1996-97. However, the CIT and the Departmental Representative contended that different benches of the ITAT had taken contradictory views on the matter, making it highly debatable. The Special Bench in the case of Times Guarantee Ltd. confirmed the 8-year limitation, indicating the contentious nature of the issue. The ITAT agreed with the CIT, stating that a debatable issue could not be rectified under section 154, which is meant for correcting mistakes apparent on the face of the record. 3. Impact of Amendment to Section 32(2) by Finance Act, 2001: The assessee cited the amendment to section 32(2) by the Finance Act, 2001, which removed the 8-year restriction on carrying forward unabsorbed depreciation. The assessee also referred to the CBDT Circular No. 14 dated 22-11-2001, which explained the amendment. However, the CIT and the ITAT relied on the Special Bench decision in Times Guarantee Ltd., which held that the 8-year limitation applied. The ITAT noted that the Gujarat High Court's decision in General Motors India Pvt. Ltd. v. DCIT, which supported the assessee's view, was delivered after the AO and CIT's orders and was not available at the time of their decisions. Therefore, the ITAT upheld the CIT's order, stating that the AO could not have rectified the issue under section 154. 4. Limitation of Order under Section 263: The assessee claimed that the CIT's order under section 263 was barred by limitation, arguing that the time limit should be calculated from the order under section 143(3). However, the ITAT clarified that the limitation period for initiating proceedings under section 263 is two years from the end of the financial year in which the order sought to be revised was passed. Since the order under section 154 was passed on 17-3-2010, the CIT's order under section 263 was within the limitation period. The ITAT confirmed the validity of the CIT's order, stating that there was no mistake apparent on the face of the record that could have been rectified by the AO. Conclusion: The ITAT dismissed the appeals filed by the assessee, upholding the CIT's order under section 263. The ITAT confirmed that the issue of unabsorbed depreciation was debatable and could not be rectified under section 154. The ITAT also ruled that the CIT's order was within the limitation period and valid in law. The appeals for the assessment years 2005-06 and 2006-07 were dismissed on identical grounds.
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