Assessing Authority Can’t Embark Upon Enquiry Regarding Nature Of Business During Previous Assessment Years In Proceedings For Relevant Assessment Year: Kerala HC
The Kerala High Court partly allowed an Income Tax Appeal and clarified that the Assessing Authority as well as the First Appellate Authority, while considering assessment proceedings for the relevant assessment years could not have embarked upon an enquiry with regard to the nature and extent of business that was carried on by the appellant-Company during previous assessment years.
The High Court was considering an appeal preferred against the order of the Income Tax Appellate Tribunal for the assessment year 2011-12.
The Division Bench of Justice Dr. A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. said, “The said findings virtually tantamount to reopening the assessments for the assessment years 1999-2000 to 2009-10 without even going into the issue as to whether or not the claim for depreciation, as also set-off of unabsorbed depreciation, made by the appellant in its returns filed during the said years were accepted by the department or not.”
Advocate Abraham Joseph Markos represented the Appellant-Assessee while Senior Counsel Jose Joseph represented the Respondent.
The appellant-Company, engaged in the business of aqua farm culture and the sale of its proceeds, changed its name to M/s.Kings Infra Ventures Limited and ventured into construction business also. During the assessment year 2011-12, the appellant filed its return of income disclosing nil income. While filing the return, the appellant made a claim of Rs.1,52,76,459 towards carried forward loss, which included depreciation loss. The total loss of Rs.1,52,76,459 was adjusted against the taxable income of Rs.35,85,037 for the assessment year 2011-12, and thereby the taxable income came to be nil. The claim for carried forward depreciation was based on the claim for depreciation made for the previous assessment years 1996-97 to 2009-10 in the returns filed by the appellant for those years.
The assessing authority disallowed the set off of loss claimed to the tune of Rs.35,85,037 and assessed the same to tax for the assessment year 2011-12 under Section 143(3) of the Income Tax Act. The appellant, therefore, preferred an appeal before the First Appellate Authority, who partly allowed the appeal, and allowed the set-off claimed in respect of brought forward unabsorbed depreciation pertaining to assessment years 1996-97 and 1997-98 against the taxable income relating to assessment years 2010-11, 2011-12 and subsequent years. The First Appellate authority further directed the assessing authority to reopen the assessment proceedings for the assessment year 2010-11 and from 2012-13 onwards to disallow the set off of the claim of unabsorbed depreciation computed from 1998-99 onwards.
The appellant filed a rectification application which was however, was disposed of by the First Appellate Authority by merely allowing the carry forward of unabsorbed depreciation for the assessment year 1998-1999 also. Thereafter, the Appellate Tribunal confirmed the findings of the First Appellate Authority. The appellant’s Income Tax Appeal was disposed by the judgment setting aside the impugned order of the Tribunal and directing the Tribunal to reconsider afresh all aspects regarding the directions given by the First Appellate Authority to the Assessing Officer to reopen the assessments for the years 2010-2011 and 2012-13 onwards. The Appellant filed the present appeal after being aggrieved by the Appellate Authority’s decision of dismissing the appeal.
The Bench was of the view that the First Appellate Authority had effectively granted the relief of permitting a set off of unabsorbed depreciation computed during the assessment years 1996-97, 1997-98 and 1998-99 against the income for the assessment year 2011-12.
It was the appellant’s case that during the said years returns were filed that were acknowledged by the department but no formal orders of assessment were passed.
On this contention, the Bench explained, “Under such circumstances, we fail to understand how the assessing authority, as well as the First Appellate Authority, while considering assessment proceedings for the assessment years 2011-12 could have embarked upon an enquiry with regard to the nature and extent of business that was carried on by the appellant during the assessment years from 1999- 2000 to 2009-10.”
The Bench also held, “Without determining the fate of the assessments made on the appellant during the assessment years 1999-2000 to 2009-10, the issue of allowance of a claim for depreciation on a claim for set-off of unabsorbed depreciation of earlier years could not have been gone into, or any directions given in regard thereto, by the First Appellate Authority.”
The Bench thus set aside the impugned order of the Tribunal, to the extent it confirmed the order of the First Appellate Authority that issued directions in relation to assessment years 2010-11 and for the assessment years succeeding 2012-13 onwards, as also to the extent it rendered findings regarding the disallowance of claims of unabsorbed depreciation losses pertaining to assessment years 1999-2000 to 2009-2010.
Allowing the Income Tax Appeal to the above extent, the Bench refused to interfere with the order of the Tribunal sustaining the findings of the First Appellate Authority with regard to completion of the assessment for the assessment year 2011-12.
Cause Title: Kings Infra Ventures Ltd. v. The Assistant Commissioner of Income Tax [Neutral Citation: 2024:KER:80349]
Appearance:
Appellant: Advocates Abraham Joseph Markos, Alexander Joseph Markos, Abraham Joseph Markos, P.G. ChandaPillai Abraham, Aibel Mathew Siby, Isaac Thomas , Sharad Joseph Kodanthara, John Vithayathil
Respondent: Senior Counsel Jose Joseph