TMI Blog2009 (1) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the six assessment years and thereafter make assessment or reassessment for those six years. Nowhere the Hon'ble Court had held that the assessment or reassessment as contemplated in this section has to be based upon incriminating materials found during search. It is settled law -that in absence of jurisdictional High Court decision, decisions from the other Hon'ble High Courts are binding upon the Tribunal. It is also settled law that when language of the Act is plain and simple there is no requirement of any interpolation therein. Furthermore, as held by the Hon'ble apex Court in the case of Smt. Tarulata Shyam Ors. v. CIT [ 1977 (4) TMI 3 - SUPREME COURT] , casus omissus need not be supplied by Courts. Hence, we respectfully following the precedent as above, uphold the order of the CIT(A) on this issue. Computation of capital gains - depreciable assets - In our opinion, the present case clearly falls under the ken of s. 50. It is not disputed that this case pertains to capital gains on depreciable assets, where all fixed assets have been sold. Sec. 41(2) deals with such assets which are sold, discarded, demolished or destroyed. However, s. 50 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is settled law that decision of Hon'ble jurisdictional High Court is binding upon the Tribunal. When assessee had not furnished necessary particulars of the debt as required by the lower authorities, a judgment in this regard cannot be made. Hence, in the interest of justice, we remit this issue to the file of the AO to give the assessee an opportunity to provide the necessary details and to prove that the judgment to write off these amounts was an honest one. In the result, this appeal by the assessee is partly allowed for statistical purposes. - SHAMIM YAHYA, ACCOUNTANT MEMBER And VIJAY PAL RAO, JUDICIAL MEMBER For the Appelant :V.S. Jayakumar For the Respondent :Shaji P. Jacob ORDER Shamm Yahya, A.M. : This appeal by the assessee is directed against the order of CIT(A)-I, Chennai, dt. 30th June, 2008 and pertains to asst. yr. 2005-06. 2. The first issue raised is that CIT(A) erred in rejecting the assessee's contention regarding jurisdiction. It has been urged that the CIT(A) erred in rejecting the assessee's submission that the provision for assessment pursuant to proceeding under s. 153C cannot be invoked unless there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act by the Finance Act, 2003 w.e.f. 1st June, 2003 primarily with' a view to surmounting the difficulties faced by the Department in reassessing the undisclosed income of an assessee surfacing as a result of the search operation. Under the new provisions, both regular income as well as undisclosed income are liable to be assessed which is quite evident from the second proviso to s. 153A, which stipulates that assessment/ reassessment relating to any assessment year falling within the period of six previous assessment years remaining pending on the date of initiation of search shall abate. The learned CIT(A) further held that there is no legal requirement under s. 153A/153C to record reasons or obtain prior approval of higher authorities for reopening of the assessment proceedings. He was of the opinion that under the provisions of s. 153A/153C, conducting of a search operation in an assessee's case is itself a sufficient ground for automatic reopening of the assessments for the six previous assessment years. The learned CIT(A) concluded that he was of the considered opinion that assessee's counsel has thoroughly misinterpreted the provisions of s. 153A/153C and has r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly as if such return were a return required to be furnished under s. 139; . (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the AO shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this section pending on the date of initiation of the search under s. 132 or making of requisition under s. 132A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-s. (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-s. (1) or s. 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-s. (1), shall stand revived with effect from the date of receipt of the order of such annulment by the CIT : Provided that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r s. 132 or s. 132A upon invocation of s. 153A or s. 153C. The proviso to s. 153A clearly mandates the AO to assess or reassess the total income in respect of each assessment year falling within six assessment years. The next proviso further mandates that any assessment or reassessment in respect of any of those six years which are pending shall abate. Hence, it is clear that under such circumstances, assessment or reassessment will be done pursuant to s. 153A or s. 153C. It will not be correct to interpolate that no regular assessment or reassessment can take place under these provisions. There is no reference to incriminating search materials as in earlier s. 158BB/158BC to which the assessment has to be confined to. 2.8. Sec. 153C only mandates that where the AO is satisfied that the material, including books of accounts or documents seized or requisitioned belongs to other person, then those materials will be handed over to the AO having jurisdiction over the other person. Admittedly, in this case, books of accounts/documents pertaining to assessee were seized and AO had recorded satisfaction in this regard as mandated in the Act. The assessment of undisclosed income is very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A, it is clear that this provision provides for a single assessment of undisclosed income of a block period in a case where search is conducted. In other words, in a case where search is conducted there shall be a block assessment for the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted and also includes the period upto the date of commencement of such search. In such cases, the AO shall issue notice to the assessee requiring him to furnish return of income in respect of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under s. 132 or requisition was made under s. 132A. The AO shall assess or reassess the total income of each of these six assessment years. (Emphasis, italicized in print, supplied) From a bare reading of the provisions of ss. 153A, 153B and 153C of the Act and the Departmental Circular dt. 5th Sept., 2003 it is manifestly clear that after 31 st May, 2003 the earlier provision of block assessment in the case of search initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing authority arising from the sale of business assets and capita l gains have been computed under s. 50. He also ought to have appreciated that the gains represented in essence depreciation that had already been allowed. He ought to have appreciated that while the computation provisions of s. 50 are applicable, the capital gains are in the nature of business income and consequently, under the ratio of the decision of the Supreme Court in United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 (SC) and CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 306 (SC), the brought forward business loss would be eligible for set off against the same. The CIT(A) erred in deciding that the decision of the Tribunal 'C' Bench in the ITA No. 1964/Mad/2003 is applicable only for sale of undertaking as a whole and not for capital gains det ermining under s. 50. 3.1 The facts pertaining to this issue are as under : The assessee group consisted of two companies i.e., M/s Harvey Heart Hospitals Ltd. (M/s HHHL) and M/s Harvey Health Care Ltd. (M/s HHCL) in which public were not substantially interested. The assessee company was incorporated in 1996, whereas its sister con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2. In the above background, AO found that despite the transaction being treated as; a slump sale, the profit arising out of the transfer of the fixed asset was recorded by the assessee as business income, which was sought to be adjusted against the brought forward unabsorbed losses and depreciation of earlier years. The AO refused to record the transaction as a slump sale. On the contrary AO held that, since only the depreciable assets were transferred by assessee, short-term capital gains was to be computed as per s. 50(1) of the IT Act. The AO further opined that since the impugned transaction was to be treated as a short-term capital gain under s. 50(1), the same did not qualify for set off against the unabsorbed business losses and depreciation within the meaning of provisions of s. 72 r/w s. 32(2) of the IT Act . 3.3 . The AO computed the short-term capital gain as under: Sale consideration as per the slump sale invoice 3,81,40,140 Less : WDV as on 1-4-2004 as per the IT Act/Rules 79,69,483 Short-term capital gain within the meaning of provisions of s. 50(1) 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Keshwa Enterprises (P) Ltd. [2006] 102 TTJ (Chd) 446 : [2006] 285 ITR 186 (Chd)(AT) and Hon'ble apex Court decision in the case of PNB Finance Ltd. v. CIT [2008] 220 CTR (SC) 110. The learned counsel further made a submission that s. 50 cannot ignore the chargeable provisions like s. 41(2). Hence, he claimed that allocation as to s. 41(2) and s. 50 has to be done. If that allocation is considered as computation within the present s. 48 as it exists, it does not fit into such computation and so the computation fails and consequentially the charge also fails. 3.7 We have heard both the counsel and perused the relevant records. The provisions of s. 50 being special provision for computation of capital gains in case of depreciable assets reads as under: Notwithstanding anything contained in cl. (42A) of s. 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian IT Act, 1922 (11 of 1922), the provisions of ss. 48 and 49 shall be subject to the following modifications: (1) where the full value of the consideration received or accruing as a result of the transfer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 32(2) as amended by the Finance (No. 2) Act, 1996 w.e.f. 1st April, 1997, in this regard, which is as under : (2) Where in the assessment of the assessee full effect cannot be given to any allowance under cl. (ii) of sub-s. (1) in any previous year owing to there being no profits or gains chargeable for that previous year or owing to the profits or gains being less than the allowance, then, the allowance or the part of allowance to which effect has not been given (hereinafter referred to as 'unabsorbed depreciation allowance'), as the case may be, (i)shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for the assessment year; (ii)if the unabsorbed depreciation allowance cannot be wholly set off under cl. (i), the amount not so set off shall be set off from the income under any other head, if any, assessable for that assessment year; (iii) if the unabsorbed depreciation allowance cannot be wholly set off under cl. (i) and cl. (ii), the amount of allowance not so set off shall be carried forward to the following assessment year and- (a)it shall be set off against the profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsorbed portion of the depreciation against income from any other head including capital gains. That being not the fact of the instant case, the claim of the assessee that unabsorbed depreciation should be allowed to be adjusted against capital gains was incorrect. The facts of the instant case attracted the provisions of s. 32(2)(iii ) because the unabsorbed depreciation was for the asst. yr. 1997-98 and the assessment year in question was 1999-2000. The unabsorbed depreciation being two years older to the current assessment year, all that the assessee would be entitled to was carry-forward of the said unabsorbed depreciation to be set off against the profits and gains of the business to which that depreciation was related to, if it was still carried on and would be allowed to be carried forward for set off for the following six assessment years because already two assessment years had lapsed. Further, the clear condition, that is laid down in that section, is that in the assessment year in which the assessee is claiming the set off of the unabsorbed depreciation, the assessee must be carrying on that business and the income from that business must exist. To put it in other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d forward to the following assessment year and- (a) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; (b) if the unabsorbed depreciation allowance cannot be wholly so set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment 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-cl. (b) shall not apply in the 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-s. (1) of s. 17 of the Sick Industrial Companies (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. 3.13. A reading of the above makes it clear that the adjustment has been subject to sub-s. (2) of s. 72 hence this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) held that he concurred with the AO's view that it is quite unlikely that assessee's hospital is sometimes compelled to discharge the patients without ensuring the recovery of medical bills due from them. The AO opined that it was well- known that in assessee's line of business, the hospital authorities inexorably insisted on lump sum deposits from patients' family members before actually proceeding with the medical treatment. The learned CIT(A) further held that on a perusal of the details submitted by the assessee, it was noted that in a large number of cases the year of patients' treatments were not mentioned. He concluded that assessee has failed to adduce any cogent evidence to establish that the assessee's hospital has really made sincere and sustained efforts to recover the outstanding dues. He further held that there is no evidence that these amounts were taken into account for the purpose of taxation of taxable income in earlier assessment years. Regarding advances written off also, the learned CIT(A) held that assessee could not furnish documentary evidence to establish their irrecoverability. In this regard, he also placed relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... become pessimistic about the prospect of recovery of debt in question. He must feel honestly convinced that the financial condition of the debtor was so precarious and shaky that it was impossible to collect any money from him. The question is really one of fact depending upon the various facts and diverse circumstances bearing on the debtor's pecuniary position, his commitments and obligations. The judgment of the assessee in regarding the debt as a bad debt must be an honest judgment and not a convenient judgment. The judgment of the assessee must be established to have been taken on relevant facts and circumstances, which should show that the debt is not realizable for some fault on the part of the debtor or some supervening impossibility on the part of the debtor to pay, but not possible difficulties or hurdles the assessee may have to incur to compel the recalcitrant debtor to pay. The assessee for his convenience may decide that the debt is too small and it is not worthwhile to pursue the debtor but that judgment would not be an honest judgment, which would establish that the debt has become a bad debt. A time-barred debt can be assumed to be bad, but is not necessarily ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
