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2015 (11) TMI 587 - ITAT CHENNAI

2015 (11) TMI 587 - ITAT CHENNAI - TMI - Depreciation of earlier year was not allowed to be set off against the income offered as unexplained cash deposit made in the account of axis bank - Held that:- As decided in Chandra Kumar v. ACIT [2009 (11) TMI 549 - ITAT MADRAS-A] according to section 71(2A) of the Act, if the net result of computation of income under the head “Profits and gains of business or profession” is a loss, then a set-off of such loss cannot be made against income assessable un .....

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ion 71 of the Act. Neither section 72 nor section 32(2) of the Act would in any way affect the inter-head adjustments specified under section 71 of the Act nor the application of specific bar contained under subsection (2A) thereof.Assessing Officer as well as the Commissioner(Appeals) were justified in disallowing set off of unabsorbed depreciation from earlier years against salary income.

Accordingly, we are of the opinion that the CIT(A) is justified in disallowing set off of unabs .....

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s of the case are that the original assessment in this case was completed on 31.12.2009 u/s.143(3) of the Act determining the income at ₹ 20 lakhs. Later on it was noticed that the assessee company claimed unabsorbed depreciation loss of ₹ 13,29,790/- for the assessment year 1997-98 and ₹ 7,06,511/- for the assessment year 1998-99 and allowed to be set off. Since these depreciation losses cannot be allowed to set off beyond 8 years of carry forward, excess depreciation has been .....

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n allowed has not suffered tax. 2.1 The assesse has filed the following objections before the AO: a. The assessee by his reply dated October 24, 2012 has objected to assumption of jurisdiction u/s 147 of the Act without showing tangible materials on the escapement of income. It has replied as under: b. We have received a notice u/s 148 of the Act dated 11.09.2012 on 13.09.2012 for the above assessment year and in this regard we strongly object to the assumption of jurisdiction u/s 147 of the Act .....

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rials would vitiate the action to reopen the proceedings and further vitiate the attempt to re-frame the re-assessment from the Assessment year under consideration. Hence we request you to drop the proceedings initiated u/s 147 of the Act on the issuance of a notice u/s 148 of the Act dated 11.09.2012 for the AY 2008-09 and thus render justice. e. In any event, the return filed originally on 28.02.2009 may be treated as the return filed in response to notice u/s 148 of the Act. As a consequence .....

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not lowed to be set off against the income of ₹ 1,22,50,000/-. Against this, the assessee went in appeal before CIT(appeals), who dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before us. 3. According to the ld. AR, there was no tangible fresh material to reopen the assessment and the original assessment was completed u/s.143(3) on 31.3.2009. When the assessment was reopened by issuing notice u/s.148 on 13.9.2012, though it was within four years at the end of th .....

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earlier years against the income of ₹ 1,22,50,000/- offered as income in respect of cash deposit in the account of axis bank of Franch Globusus very much with the AO and he cannot reopen the concluded assessment to withdraw set off of depreciation, which was allowed in earlier occasion. 4. The ld. DR relied on the orders of the lower authorities. 5. We have heard both the parties and perused the material on record. In this case, the contention of the assessee s counsel is that reassessment .....

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of General Motors India (P) Ltd. (257 CTR 123), which is kept on record. 6. We have carefully gone through the reasons recorded for reopening i.e. to withdraw the set off unabsorbed depreciation against the income of ₹ 1,22,50,000/- offered as unexplained cash deposit made in the account of axis bank . This amount of ₹ 1,22,50,000 is taxable u/s.69 of the Act. Therefore, the excess depreciation allowed has not suffer taxation. 7. It is a settled law that on the basis of material, pri .....

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usively prove the escapement of income is not the concern at that particular stage. So what is required is the subjective satisfaction of the Assessing Officer based on objective material evidence. In the given case, there was no assessment. The argument of the ld.AR is that u/s 147 no action could be taken unless the assessee has not disclosed fully and truly all material facts necessary for the assessment for that assessment year. 7.1 As seen from the reasons recorded, give a clear picture tha .....

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has escaped assessment. It is also mandated by section 148(2) to record reasons in writing. The reassessment proceedings u/s 147 are further subject to sections 148, 149, 150, 151, 152 and 153. But in the present case, we are required to decide the limited issue regarding the validity of proceedings undertaken within four years from the end of the relevant assessment year in question. In case, (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low .....

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e satisfied that the Assessing Officer has reason to believe that income has escaped assessment. This fact confers jurisdiction on him to reopen the assessment. The power to re-assess post 1st April, 1989 are much wider than these used to be before. But still the schematic interpretation of the words reason to believe failing which section 147 would give arbitrarily powers to the Assessing Officer to reopen the assessment on the basis of mere change of opinion, which cannot be, per se a reason t .....

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sment order which would simply amount to a review. The concept change of opinion is an in-built test to check the abuse of power by the Assessing Officer. So, now only when the Assessing Officer has a tangible material to base his conclusion that there is an escapement of income from assessment and the reasons recorded have a link with the formation of his belief, he has the power u/s 147 of the Act. 7.2 Further, the Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. (291 .....

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s done by them. The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156 for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. Nothing more can be inferred from the deeming provisions. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion does not arise. Held accordingly, that the As .....

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To consider the same, the assessment was reopened. As far as Explanation 2 to sec.147 is concerned, it is very clear that if excess claim of the assessee was allowed, the income chargeable to tax has escaped assessment. Hence, the action of the Assessing Officer is fully covered by the Explanation 1 to sec.147 which reads as under: Production before the Assessing Officer of accounts books or other evidence from which material evidence could with due diligence have been discovered by the Assessin .....

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ion. 10. The ld. AR submitted that the judgment of the Gujarat High Court in the case of General Motors India (P) Ltd. v. DCIT (257 CTR 123) cannot be applied to the assessee s case. He relied on the decision of the Tribunal in the case of Shri P. Subramanian v. ITO in ITA No.1363/Mds/2010 dated 26.7.2012, Wherein it was held as under : 5. The counsel for the assessee submits that the Assessing Officer computed the total income of the assessee at ₹ 31,98,212/- without allowing inter-head s .....

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. The counsel submits that the facts before the Hon ble Gujarat High Court was that the assessee claimed the value of gold confiscated, as deduction from income as trading loss . The assessee did not derive any income from the business of smuggling. Therefore, it was held that the confiscation of gold did not represent trading loss in the hands of the assessee. Whereas, in the case of the assessee, there is no dispute that the assessee incurred loss under the head business in trading of shares a .....

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dition of ₹ 30.00 lakhs made by the Assessing Officer is also an income and cannot be excluded from the total income of the Act and therefore, shall be chargeable under the head other sources . The counsel further submitted that as per section 4 of the I.T. Act, the income tax is payable on the total income of the previous year of every person. He submitted that section 5 defines the scope of total income and as per section 14, all the income shall, for the purpose of charge of income tax .....

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income from other sources . The counsel for the assessee relied on the decision of the Hon ble Supreme Court in the case of CIT v. D. P. Sandu Bros. Chembur P. Ltd.[273 ITR 1] in support his contention that income assessed under section 68/69 shall, for the purpose of charge of income and computation shall fall under any one of the heads of income as specified in section 14 of the Act. The counsel submits that the decision of the Hon ble Gujarat High Court in the case of Fakir Mohammed Haji Has .....

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ecified under section 14 of the Act. He submits that if the assessee is able to prove that the credit must fall under any particular head then the deemed income shall fall under that particular head. In case, the assessee is unable to prove so, then the deemed income would fall under the head other sources . The counsel submits that in case of assessee, which is carrying on the business in trading of shares, income is chargeable to tax under the head business and the normal inference is that dee .....

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v. Shilpa Dyeing & Printing Mills (P) Ltd. 381 DTR (Guj) 381 wherein it was held that: Section 71 permits assesse to set off loss other than that of capital gains against income from other head. Thus, statutory provisions contained in Section 71 was applicable in present case. Revenue s appeal dismissed. The ld. AR also relied on the judgment of the Madras High Ccourt In the case of CIT v. Chensing Ventures (291 ITR 258) 11. The ld. DR relied on the orders of the lower authorities and the ju .....

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ed as unexplained u/s.69 of the Act. The Tribunal considered the facts of the case and observed as business loss of the assessment year under consideration could be set off against the income assessed u/s.68 under the head other sources . However, the issue on hand before us in this appeal is whether unabsorbed depreciation of earlier years could be set off against deemed income u/s.69 of the Act or not, which is totally different issue. Section 72 of the Act does not permit set off of accumulat .....

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