TMI Blog2012 (12) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... g to assessment year 2007-08 - This issue is covered against the assessee by the order of the Special Bench in the case of DCIT Versus Times Guaranty Ltd. [2010 (6) TMI 516 - ITAT, MUMBAI] wherein held that unabsorbed depreciation relating to assessment years 1997-98 to 1999-2000 is to be dealt with in accordance with the provisions of section 32(2) as applicable to assessment year 1997-98 to 1999-2000 and, therefore, assessee cannot claim set off of unabsorbed depreciation relating to assessment year 1997-98 to 1999-2000 under any head of income other than “income from business or profession” in assessment years 2003-04 and 2004-05 - issue is decided against the assessee. when there are several decisions of non-jurisdictional High Courts expressing contrary views, the Tribunal is free to choose to adopt that view which appeals to it. For this purpose, we place reliance on the order of the Special Bench in the case of Kanel Oil & Export Industries Ltd. vs. JCIT, (2009 (8) TMI 806 - ITAT AHMEDABAD-C). Settlement of dues with Stressed Assts Stabilisation Fund IDBI - Held that:- Perusuing the material on record & going through the impugned assessment order there is no discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible view and cannot be called erroneous for the purposes of section 263. 6. That on the facts and in the circumstances of the appellant s case and in law, learned CIT has erred in applying provisions of section 263 on the point(s) for which no show-cause notice was issued to the appellant. 7. That on the facts and in the circumstances of the appellant s case and in law, learned CIT has erred in observing that the appellant agreed to setting aside of the assessment order as made by the learned Assessing Officer. 8. That each of the grounds of appeal above are independent and without prejudice to one another. 9. That the impugned order of learned CIT being contrary to facts and circumstances of the appellant s case, law applicable and material on record may be set aside or such order may be passed thereupon as Hon ble Tribunal may deem fit. 10. That the appellant craves leave to reserve to itself to add on, cancel, alter or modify any of the grounds of appeal above before or at the time of hearing of this appeal and to produce such documents, evidence or material in support of this appeal as considered necessary by the appellant. 3. Brief facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned AR submitted that the impugned order passed by the learned Commissioner of Income Tax is against the basic tenets of provisions of Section 263 of Income Tax Act, 1961 on the following aspects of law governing the facts of the case. The assessment order passed cannot be termed as "erroneous" inasmuch as the Assessing Officer has passed the order after application of his mind on the very same issue, after considering all the information, explanation filed. The Commissioner of Income Tax cannot substitute his own views on the issue in exercise of the jurisdiction under Section 263 of Income Tax Act, 1961. For this purpose, he relied on the following case-law: 1. Malabar Industries Co. Ltd. vs. CIT 2. CIT v. Gabriel India Ltd. (203 ITR 108) (Bom) 5. Further AR submitted that the impugned order under Section 263 of Income Tax Act, 1961 is not maintainable for the reason that the show cause notice was issued for alleged failure of further enquiry into the matter, even in the body of the impugned order it goes to show that the assessment order was proposed to be revised for further enquiry into the matter. It was submitted that if the learned Commissioner was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oneous unless it is not in accordance with law. If an Income-tax officer acting in accordance with law makes a certain assessment, the same cannot be branded as 'erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to reexamine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on which he had come to such conclusion. It is well settled principle of law that the principle of res judicata does not apply to the Income Tax proceedings. 10. No new material has been brought on record to suggest that the assessment order was erroneous and prejudicial to the interests of revenue. Therefore, the jurisdiction under Section 263 of Income Tax Act, 1961 cannot be assumed. 11. The AR submitted that that the learned Assessing Officer after duly considering the explanation and information filed in response to the questionnaire on the issue, on being satisfied with such explanation chose not to make any further enquiry. Endless enquiry is not possible and it is for the learned Assessing Officer to decide when to end the enquiry. The learned CIT cannot transgress the jurisdiction under Section 263 of I.T. Act, 1961 by mentioning that no proper enquiry was made. 12. The learned AR also submitted that there is a contradiction between the show-cause notice and the order of the CIT and the CIT has not given any finding and also given wrong direction to the Assessing Officer to redo the entire assessment by setting aside the assessment order. Being so, it was submi ..... 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, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous year." 15. He submitted that from the above it is clear that there is no time limit u/s 32(2) for set off of any unabsorbed depreciation brought forward from earlier years. It may be pointed out that this is the interpretation given by CBDT in circular No.14 of 2001 dated 12.12.10 reported in 252 ITR (Statute) 65. 16. As regards the objection of Audit, based on ITAT Special Bench decision in the case of DCIT vs. M/s. Times Guaranty limited reported in 131 TTJ (Mum.) (SB) 257, it is submitted by the AR that no cognizance of that decision can be taken by any assessing officer in view of CBDT circular no.14 (Supra) It is a settled legal position that CBDT circular cannot be dissented by the assessing officer, more so if the circular is beneficial to taxpayer. For this, there is a clear authority in the Hon'ble Supreme Court judgment in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 the revenue. But if the legislature fails to express clearly and the assessee becomes entitled for a benefit within the ambit of the section by the clear words used in the section, the benefit accruing to the assessee cannot be denied. However, Circular No. 14 of 2001 had clarified that under Section 32(2), in computing the profits and gains of business or profession for any previous year, deduction of depreciation under Section 32 shall be mandatory. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long as there is no decision of jurisdictional High Court, the Tribunal is bound by the judgement of any other High Court which is available directly on the subject. 21. According to AR, in view of the Third Member decision of Chennai Bench cited supra Gujarat High Court decision is to be followed instead of Special Bench decision. 22. The AR drew our attention to the law of Income-tax by Sampath Iyengar with regard to scope and effect of the amendment as explained by the Board in Circular No. 14 of 2001. 23. The AR submitted that, therefore, it can be said that, current depreciation is deductible in the first place from the income of the business to which it relates. If such depreciation amount is larger than 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. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional u/s 263 if he is satisfied that the order of the assessing officer sought to be revised is (i)erroneous; and also (ii) prejudicial to the interests of the revenue. The word erroneous has not been defined in the Income Tax Act. It has been however defined at page 562 in Black s Law Dictionary (seventh Edition) thus; erroneous, adj. Involving error, deviating from the law . The word error has been defined at the same page in the same dictionary thus: error No. 1 : A psychological state that does not conform to Objective reality; a brief that what is false is true or that what is true is false . At page 649/650 in P. Ramanatha Aiyer s Law Lexicon Reprint 2002, the word error has been defined to mean- Error: A mistaken judgement or deviation from the truth in matters of fact, and from the law in matters of judgement error is a fault in judgement, or in the process or proceeding to judgement or in the execution upon the same, in a Court of Record; which in the Civil Law is called a Nullityie (termes de la ley). Something incorrectly done through ignorance or inadvertence S.99 CPC and S.215 Cr.PC. Error, Fault, Error r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner will be well within his powers to regard an order as erroneous on the ground that in the circumstances of the case, the Assessing Officer should have made further inquiries before accepting the claim made by the assessee in his return. The reason is obvious. Unlike the Civil Court which is neutral in giving a decision on the basis of evidence produced before it, the role of an Assessing Officer under the Income-tax Act is not only that of an adjudicator but also of an investigator. He cannot remain passive in the face of a return, which is apparently in order but calls for further enquiry. He must discharge both the roles effectively. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The scheme of assessment has undergone radical changes in recent years. It deserves to be noted that the present assessment was made under Section 143(3) of the Income-tax Act. In other words, the Assessing Officer was statutorily required to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall the orders passed without applying the principles of natural justice or without application of mind. In our humble view, arbitrariness in decision-making would always need correction regardless of whether it causes prejudice to an assessee or to the State Exchequer. The Legislature has taken ample care to provide for the mechanism to have such prejudice removed. While an assessee can have it corrected through revisional jurisdiction of the Commissioner under Section 264 or through appeals and other means of judicial review, the prejudice caused to the State Exchequer can also be corrected by invoking revisional jurisdiction of the Commissioner under Section 263. Arbitrariness in decision-making causing prejudice to either party cannot therefore be allowed to stand and stare at the legal system . It is difficult to cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge. 30. Similar view was earlier taken by the Hon'ble Supreme Court in Siemens Engg. Mfg. Co. Ltd. v. Union of India AIR 1976 SC 1785. It is settled law that while making assessment on assessee, the ITO acts in a quasi-judicial capacity. An assessment order is amenable to appeal by the assessee and to revision by the Commissioner under Sections 263 and 264. Therefore, a reasoned order on a substantial issue is legally necessary. The judgments on which reliance was placed by the learned Counsel for the assessee also points to the same direction. They have held that orders, which are subversive of the administration of revenue, must be regarded as erroneous and prejudicial to the interests of the revenue. If the Assessing Officers are allowed to make assessments in an arbitrary manner, as has been done in the case before us, the administration of revenue is bound to suffer. If without disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation or enquiry or verification or objective consideration of the claim made by the assessee. The Assessing Officer has completely omitted to examine the issues in question from consideration and made the assessment in an arbitrary manner. His order is a completely nonspeaking order. In our view, it was a fit case for the learned Commissioner to exercise his revisional jurisdiction under section 263 which he rightly exercised by cancelling the assessment order and directing the Assessing Officer to pass a fresh order considering the issues raised by the CIT. In our view, the assessee should have no grievance in the action of learned Commissioner in exercising the jurisdiction u/s. 263 of the IT Act. 33. It was however contended by the learned Counsel that the Assessing Officer had taken a possible view in accepting the return of the assessee with reference to expenditure and hence, the Commissioner was not justified in assuming the revisional jurisdiction under Section 263. We have given our thoughtful consideration to the aforesaid submissions. As already stated earlier, an order becomes erroneous because inquiries, which ought to have been made on the facts of the case, were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the assessee / revenue, without making proper inquiries and without proper examination of the claim made by the assessee in the light of the applicable law. As already stated earlier, we are not able to appreciate on what material was placed before the Assessing Officer at the assessment stage to take such a view. The assessee has also not been able to lead enough evidence to show to us that any inquiry was made by the Assessing Officer in this regard. Therefore mere allegation that the Assessing Officer has taken a view in the matter will not put the matter beyond the purview of Section 263 unless the view so taken by the Assessing Officer is a judicial view consciously based upon proper inquiries and appreciation of all the relevant factual and legal aspects of the case. The judicial view taken by the Assessing Officer may perhaps place the matter outside the purview of Section 263 unless it is shown that the view so taken by the Assessing Officer contains some apparent error of reasoning or of law or of fact on the face of it. 35. The learned Counsel has strongly relied upon the following observations made in the case of Malabar Industrial Co. Ltd. (supra) and submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt" a course permissible in law nor "take" a view where two or more views are possible. In other words, it is the Assessing Officer who has to adopt a permissible course of law or take a view where two or more views are possible. It is difficult to comprehend as to how the Assessing Officer can be attributed to have "adopted" a permissible course of law or "taken" a view where two or more views are possible when the order passed by him does not speak in that behalf. We cannot assume, in order to provide legitimacy to the assessment order, that the Assessing Officer has adopted a permissible course of law or taken a possible view where his order does not say so. The submissions made by the learned Counsel, if accepted, would require us to form, substitute and read our view in the order of the Assessing Officer when the Assessing Officer himself has not taken a view. It could have been a different position if the Assessing Officer had "adopted" or "taken" a view after analysing the facts and deciding the matter in the light of the applicable law. However, in the case before us, the Assessing Officer has not at all examined as to whether only one view was possible or two or more views ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer and thus be amenable to revision under Section 263. In this case before us, the assessment order passed by the Assessing Officer lacks judicial strength to stand. It is not a case where the order is short but is not supported by judicial strength. It is in this view of the matter that we feel that the learned Commissioner has correctly exercised his revisional jurisdiction under Section 263. 39. In our opinion, the Assessing Officer has been entrusted the role of an investigator, prosecutor as well as adjudicator under the scheme of the Income-tax Act. If he commits an error while discharging the aforesaid roles and consequently passes an erroneous order causing prejudice either to the assessee or to the State Exchequer or to both, the order so passed by him is liable to be corrected. As mentioned earlier, the assessee can have the prejudice caused to him corrected by filing an appeal; as also by filing a revision application under Section 264. But the State Exchequer has no right of appeal against the orders of the Assessing Officer. Section 263 has therefore been enacted to empower the Commissioner to correct an erroneous order-passed by the Assessing Officer which he cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is a settled law that when a court declares the law on a subject, the declaration goes back to the date of enactment of that particular law as to state that the law from the date of its enactment itself was in the manner decided by the court subsequently. Therefore, the pronounced order of the Special Bench dates back to the date of enactment and, therefore, the superimposition made by the judicial pronouncement the assessment order has become erroneous. It is not only erroneous, but also prejudicial to the interest of revenue inasmuch as the error has contributed in granting excessive relief to the assessee. The arguments of the CIT DR that the question of allowability of claim was sub-judice before the Tribunal Special Bench (Mumbai) at the time of passing the revision order is accepted and the argument of the assessee's counsel that it is a debatable issue is rejected as there was no discussion of whatsoever by the Assessing Officer in the impugned assessment order. In our humble opinion subject matter of the revision is pending before the Special Bench for adjudication and the Assessing Officer passed the assessment order without an iota of discussion on the issue of whatsoe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed depreciation brought forward as on 1st April, 1997 could be set off against business income or income under any other head for A.Y. 1997-98 and 7 subsequent assessment years by relying on the clarification of Finance Minister as well as CBDT circular No.762 dated 18.2.1997 (145 ITR St. 5). Being so, un adjusted depreciation brought forward up to 1st April, 1997 became eligible for set off not only against the business income but also against income under the other heads in 8 assessment years only on the strength of the clarification given by the Finance Minister. Being so, in our opinion, judgement of High Court, though not of the jurisdictional High Court, prevails over an order of the Special Bench. However, when there are several decisions of non-jurisdictional High Courts expressing contrary views, the Tribunal is free to choose to adopt that view which appeals to it. For this purpose, we place reliance on the order of the Special Bench in the case of Kanel Oil Export Industries Ltd. vs. JCIT, (121 ITD 596) (SB) (Ahd). 43. Regarding the issue relating to settlement of dues with Stressed Assts Stabilisation Fund IDBI, the AR submitted the issue is to be decided in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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