w w w . L a w y e r S e r v i c e s . i n



M/s. Rajeshwari Cotton Ginning & Pressing Industries, rep., by its partner T. Vijayakumar Matada Hatti Village v/s The Asst. Commissioner of Income Tax


Company & Directors' Information:- THE COTTON CORPORATION OF INDIA LIMITED [Active] CIN = U51490MH1970GOI014733

Company & Directors' Information:- J. K. COTTON LIMITED [Active] CIN = U17111UP1924PLC000275

Company & Directors' Information:- J M COTTON GINNING AND PRESSING COMPANY PRIVATE LIMITED [Active] CIN = U99999MH1955PTC009631

Company & Directors' Information:- P D COTTON PRIVATE LIMITED [Active] CIN = U52321GJ2007PTC051857

Company & Directors' Information:- K V COTTON GINNING AND PRESSING COMPANY PRIVATE LIMITED [Active] CIN = U14050MH1948PTC006521

Company & Directors' Information:- R. I. COTTON PRIVATE LIMITED [Active] CIN = U17120GJ2010PTC061139

Company & Directors' Information:- D D COTTON PRIVATE LIMITED [Active] CIN = U17120MH1994PTC156054

Company & Directors' Information:- P. I. COTTON PRIVATE LIMITED [Active] CIN = U17120GJ2007PTC050747

Company & Directors' Information:- INCOME INDUSTRIES PRIVATE LIMITED [Active] CIN = U02411MP1989PTC005351

Company & Directors' Information:- RAJESHWARI INDUSTRIES PRIVATE LIMITED [Active] CIN = U27310MH2015PTC263132

Company & Directors' Information:- B V COTTON PRIVATE LIMITED [Active] CIN = U17111GJ2004PTC044704

Company & Directors' Information:- S K COTTON PRIVATE LIMITED [Active] CIN = U17110GJ2006PTC047511

Company & Directors' Information:- S R COTTON PRIVATE LIMITED [Active] CIN = U17120KA2013PTC071881

Company & Directors' Information:- S D S COTTON PVT LTD [Active] CIN = U17115PB1991PTC011007

Company & Directors' Information:- P A COTTON PVT LTD [Active] CIN = U74999WB1992PTC055525

Company & Directors' Information:- D D COTTON PRIVATE LIMITED [Not available for efiling] CIN = U17115PB1994PTC014981

Company & Directors' Information:- S S GINNING AND PRESSING PRIVATE LIMITED [Active] CIN = U18101MH1998PTC115628

Company & Directors' Information:- K S COTTON PRIVATE LIMITED [Active] CIN = U17299WB2003PTC096994

Company & Directors' Information:- P R COTTON INDUSTRIES PRIVATE LTD. [Active] CIN = U74899DL1987PTC028281

Company & Directors' Information:- D B GINNING PRIVATE LIMITED [Active] CIN = U17120GJ2012PTC071223

Company & Directors' Information:- B D COTTON PRIVATE LIMITED [Active] CIN = U51909GJ1978PTC003234

Company & Directors' Information:- G K COTTON PVT LTD [Active] CIN = U00309BR1982PTC001698

Company & Directors' Information:- R R COTTON PRIVATE LIMITED [Active] CIN = U17111DL1998PTC094459

Company & Directors' Information:- C R COTTON INDIA PRIVATE LIMITED [Active] CIN = U17299DL2006PTC145903

Company & Directors' Information:- V. T GINNING AND PRESSING PVT. LTD [Strike Off] CIN = U01405GJ2006FLC048936

Company & Directors' Information:- VILLAGE INDUSTRIES PRIVATE LIMITED [Dissolved] CIN = U29299KL1947PTC001322

    ITA No. 801 of 2009 & ITA Nos. 840-841 of 2009

    Decided On, 17 November 2015

    At, High Court of Karnataka

    By, THE HONOURABLE MR. JUSTICE VINEET SARAN & THE HONOURABLE MRS. JUSTICE S. SUJATHA

    For the Appellant: A. Shankar, M. Lava, Advocates. For the Respondent: K.V. Aravind, Advocate.



Judgment Text

(Prayer: These Appeals are filed under Section 260-A of I.T.ACT, 1961 arising out of order dated 31.7.2009 passed in ITA Nos. 880-882/BNG/2007, for the assessment years 1987-88 & 1988-89 & 1989-90, praying I)To formulate the substantial questions of Law II) Allow the appeal and set aside the order passed by the ITAT, Bangalore, Dated 31.7.2009.)

1. These appeals are preferred by the assesse under Section 260 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) challenging the order passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru Bench, ‘A’ in ITA Nos.880, 881 and 882 (Bang)/2007 dated 31.07.2009.

2. The brief facts of the case are that the appellant is a registered firm engaged in the business of purchase and sale of Lint, Ginning of cotton and sale of cotton seeds oil and cake. It transpires that the appellant filed its return of income for the assessment year 1987-88 declaring the total income at Rs. NIL after setting off of net profit of Rs.23,072/- towards total loss. After setting off of RS. 23,072/- the appellant carried forward the losses to the subsequent year. The return of income filed by the appellant on 16.03.1990 was selected for scrutiny and notices under Section 142(1) and 143(2) of the Act were issued. In response to the said notice, the representative of the appellant appeared and furnished the details called for. The Assessing Officer processed the return to the appellant and passed the order of assessment disallowing the claim of carry forward of depreciation and set off of business losses vide order dated 26.03.1991. Being aggrieved by the said order, the appellant filed an appeal before the commissioner of Income Tax (Appeals) (for short CIT(A)), Belgaum, contending several grounds. The CIT(A), Belgaum, heard the appellant and passed the order allowing certain issues and set aside the other issues to the file of the Assessing Officer. However, the ground of the assesse regarding the denial of set off of carry forward of unabsorbed depreciation and investment allowance was untouched by the CIT(A), Belgaum. Pursuant to the order of the CIT(A), the Assessing officer passed an order giving effect to the appellate order of CIT(A) on 24.08.1992 in respect of issues allowed by the CIT(A). The Assessing Officer passed or order giving effect to the appellate order of CIT(A) on 02.02.2005 in respect of issues set by the CIT(A). Thus, the appellate order was given effect by two separate orders. The order dated 02.02.2005 was passed taking into account the income determined in the first order dated 24.08.1992. Being aggrieved by the order dated 02.02.2005, the appellant filed a rectification application under Section 154 of the Act. After considering the said application, the Assessing Officer held that the appellant-assessee cannot claim the issue which was not in the order of CIT(A) that the Assessing Officer ought to have considered while giving effect to the appellate order. Being aggrieved by the said order, the assessee has filed an appeal before the CIT(A), Hubli. The CIT(A) Hubli, after hearing the appellant on 28.03.2007. has held that the appellant cannot seek for carrying forward the unabsorbed depreciation upto assessment year 1986-87 to the next year because it is mandatory on his part to file the loss return before the due date stipulate under Section 139(1) of the Act and it was also held that the claim of the assessee was contrary to the provision of Section 139(4) of the Act.

3. Being aggrieved by the said order dated 28.03.2007, the assesse filed appeals before the Income Tax Appellate Tribunal (for short the ‘ITAT), Bangalore Bench ‘A’ for the Assessment Years-1987-88, 1989-90. The ITAT dismissed the appeals of the appellant. Being aggrieved by the order passed by the ITAT, these appeals are filed by the assesse.

4. Learned counsel appearing for the appellant contended that the appellant-assessee had filed return of income for the assessment year 1986-87 on 25.09.1986 though he was required to file the returns on or before 31.07.1986 as per the provisions of Section 139(3) of the Act. The order being passed under Section 143(1) of the Act, the total loss was determined at RS.1,43,334/- and depreciation at Rs.3,06,892.44 was carried forward to the assessement year 1987-88 under Section 32(2) of the Act, investment allowance reserve at Rs.3,26,730/- and 80J exemption at Rs.1,16,601.28 was also carried forward to the assessment year1987-88. The authorities having rejected the claim of the assesse to carry forward andmatter was adjudicated before the Tribunal. The Tribunal, primarily considering the belated returns filed by the assesse for the assessment year 1986-87 and further rectification application being filed by the assessee against the order of the CIT(A) before the Assessing Officer, held that the assesse is not entitled to carry forward the unabsorbed depreciation, investment allowance and 80J exemption as claimed by the assessee. The Tribunal has proceeded with hypertechnicalities without looking into the merits of the case. Filing of the returns belatedly would not disqualify the assessee to claim the benefit of unabsorbed depreciation, investment allowance and 80J exemption.

5. Learned counsel placed reliance on the judgment of this Court in the case of Brahmavar Chemicals Pvt.-vs-Commissioner of Income Tax and another reported in (1999) 239 ITR 867 to contend that no time limit is provided for carry forward of depreciation of earlier years which has now been restricted to eight years as that of loss, but the Legislature has considered the unabsorbed depreciation and investment allowances differently than that of business loss. In the circumstances, the period of limitation prescribed under Section 139(1) of the Act is not applicable to carry forward of unabsorbed depreciation and investment allowance. Learned counsel further placed reliance on the Division Bench judgment of the Delhi High Court in the case Commissioner of Income-Tax –vs- Govind Nagar Sugar Ltd. Reported in (2011) 334 ITR 13 (Delhi) to contend that the effect of Section 32(2) of the Act is that unabsorbed depreciation of a year becomes part of depreciation of the subsequent year and in the case of unabsorbed depreciation there is no time limit for filling of the returns and further that under the statute there is a separate identify with respect to unabsorbed depreciation though at the time of computation, it become a part of loss.

6. Learned counsel also relied on the judgment of the Punjab and Haryana High Court in the case of Commissioner of Income Tax-vs- Haryana Hotels Ltd., reported in (2005) 276 ITR 521wherein it has held thus:

'Similarly, there is no provision under the Act which makes it mandatory for the assesse to file return for carry forward and set off of unabsorbed depreciation which is to be notified by the Assessing Officer as in the case of unabsorbed business loss. Thus, from a reading of the provisions of the Act, the distinction between unabsorbed deprecition and unabsorbed business loss for the purpose of set off and carry forward is clear.'

7. Further, learned counsel placed reliance on the judgment of kerala High Court in the case of Parekh Brothers –vs-Commissioner of Income-Tax, Kerala-II, Ernakulam and others reported in (1984) 150 ITR 105, wherein it has held thus:

'It may not be out of place to refer to a Circular issued by the Central Board of Direct Taxes No. 14 (XL-35) of 1955, dated April 11, 1955 (referred to as item 491 in Taxman’s Direct Taxes Circulars, Volume I, 1977, 4th Edition). The title is 'Administrative instructions.' In regard to the attitude of the Department in matters affecting the assessee’s interest. Para 3 of the said circular is as follows;

'Officers of the Department must not take advantage of the ignorance of an assesse as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and security reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assesses on whom it is imposed by law, officers should:

(a) Draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;

(b) Freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.'

8. Per contra, Sri K.V. Aravind, learned counsel appearing for the respondent-Revenue contended that at the first instance the assesse having filed the return belatedly for the assessment year 1986-87 is not entitled to carry forward the unabsorbed depreciation, investment allowance and 80J exemption for the assessment year 1987-88. In the appeal preferred by the assesse before the CIT(A), the Appellate Authority having considered the grounds urged by the appellant on certain issues remanded the matter back to the Assessing Authority. After the order passed by the Assessing Authority, the assesse filed an application under Section 154 of the Act rectification of the order of the CIT(A). The Tribunal has observed the same that no rectification application can be entertainable before the Assessing Officer to rectify the order of the CIT(A). If the assesse was aggrieved by any order passed by the CIT in the appeal, it was appropriate for the assesse to file rectification application before the CIT(A) or otherwise to carry the matter in appeal, without having done so filing an application before the Assessing Officer to rectify the orders passed by the ITAT is unknown to law and such an action of the assesse in claiming unabsorbed depreciation would not be entertained at the belated stage more particularly, when the returns are filed for the assessment year 1986-87 belatedly. It is also contended that unless unabsorbed depreciation, investment allowance and 80J exemption claimed by the assesse is not carried forward in the subsequent years and more particularly, when the provision only provides to carry forward of the unabsorbed depreciation from the previous year. If no such depreciation is carried forward from the previous year and if there is any break in the carry forward of the depreciation, the assesse is not entitled to carry forward the depreciation for the subsequent years. Accordingly, learned counsel justifies the order passed by the Tribunal and seeks for dismissal of the appeal.

9. Having heard the rival submissions of the parties and perusing the records, the substantial questions of law which are required to be answered by this Court are as follows:

'(i) Whether the Tribunal was justified in law in holding that the Appellate is not entitled to claim set off of unabsorbed depreciation and investment allowance of the A.Y. 1986-87 in the subsequent years of 1987-88, 1988-89 & 1989-90 when the set off of unabsorbed depreciation and investment allowance is as per scheme of the Act?

(ii) Whether the Tribunal was justified in law in not appreciating the difference between business loss and unabsorbed depreciation and investment allowance on the facts and circumstances of the case?

(iii) Whether the Tribunal ought to have granted the relief of carry forward of depreciation, investment allowance and 80J exemption on the facts and circumstances of the case?'

10. It is an undisputed fact that the return of income for the assessment year 1986-87 was filed by the assesse on 25.09.1986 belatedly. However, filing of belated returns itself would not restrain the assesse from claiming set off of unabsorbed depreciation, investment allowance and 80J exemption. This aspect of the matter is extensively considered by the learned Single Judge of this Court in the case of Brahmavar (supra) and has held that there is no time limit provided for carry forward of depreciation of earlier years and unabsorbed depreciation and investment allowance, stands differently than that of the business loss. In respect of other assesses other than in case of amalgamation the unabsorbed depreciation or investment allowance, if claimed in a return filed after the time prescribed under Section 139(1) is not restricted.

The Division Bench of Delhi High Court, Punjab and Haryana High Court in the Judgments cited supra have held that the assessee is entitled to get unabsorbed depreciation and set off in the subsequent years even if no valid return for the assessment year relating to which the depreciation and set off arises, had been filed by the assesse or if it is even belatedly filed, the assessee is entitled to the benefits of unabsorbed depreciation and investment allowance. We have no reasons to deviate from these judgments. Thus, the belated filing of the returns would not curtail the right of the assesse to claim unabsorbed depreciation, investment allowance and 80J exemption under the Act. We are of the considered opinion that the Tribunal has proceeded hypertechnically in rejecting the claim of the assesse on the ground that rectification application was filed by the assessee before the Assessing Officer after giving effect to the order of the CIT(A). It is significant to note in the Circular issued by the Central Board of Direct Taxes No. 14 (XL-35) of 1955, dated April 11, 1955 (referred to as item 491 in Taxman’s Direct Taxes Circulars, Volume I, 1977, 4th Edition), it has dealt with 'Administrative instructions' in regard to the attitude of the Department in matters affecting the assessee’s interest. It has categorically held that the Officers of the Department must not take advantage of the ignorance of an

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assessee as to his rights. It is one of their duties to assist a taxpayer (assessee) in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate whether some refund or relief is due to the assesse, which would benefit the Department and it would inspire confidence in the assesse. In such view of the matter the Tribunal ought to have taken a wider look in allowing the claim of the assesse even if the return for the assessment year 1986-87 is belatedly filed, which would not restrict the rights of the assesse to claim the benefit of unabsorbed depreciation, investment allowance and 80J exemption. 11. It is also pertinent to note that learned counsel appearing for the assesse has submitted that he is not disputing the carry forward of business loss and has restricted his claim only to the issue of carry forward of unabsorbed depreciation, investment allowance and 80J exemption. In the wake of the judgments referred to above and for the reasons aforesaid, we are of the view that the appeals require to be allowed. The substantial question of law Nos.(i) and (iii) are answered in favour of the assesee and against the Revenue. Having answered these questions, we need not answer question No.2. Accordingly, the appeals filed by the assessee are allowed and remanded back to the Assessing Officer to give effect to the observations made in the order and to pass appropriate orders accordingly.
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