2013 (10) TMI 153 - HC - Income Tax

Court orders Settlement Commission to reconsider assessment due to unabsorbed depreciation claim

The Court directed the Settlement Commission to recall its order for the assessment years 2009-10 and 2010-11 for fresh disposal due to the Commission's ... Power of Settlement commission to rectify or review its order - Order of Settlement commission did not take into account the unabsorbed depreciation – Held that:- This is a fit case where the power of rectification could and should have been exercised - While passing the order, the Settlement Commission overlooked an important fact which would go to the root of the matter - If the petitioner was entitled to set-off income against the carry forward unabsorbed depreciation, the Commission was bound to look into the same and accord such treatment as under the law was required - Commission was required to bear in mind this important aspect which would have a bearing on the assessment orders. Under such circumstances, the Commission ought to have recalled its order of settlement for the assessment years 2009-10 and 2010-11 by granting the application for rectification – Ordered accordingly. Issues:Challenge to order of Settlement Commission for assessment years 2009-10 and 2010-11, refusal to rectify earlier order.Analysis:The petitioner challenged a common order passed by the Settlement Commission for various assessment years, specifically focusing on the assessment years 2009-10 and 2010-11. The petitioner claimed that unabsorbed depreciation was not considered by the Commission while raising the tax demand, resulting in an impermissible tax demand. The petitioner filed an application for rectification, which was rejected by the Commission citing that the issue raised was debatable and amounted to a review of the original order, which was not permissible under law. However, the Court noted that the power of rectification could have been exercised in this case as the petitioner's claim was straightforward and based on a fact evident from the record. The Court emphasized that if the petitioner was entitled to set-off income against unabsorbed depreciation, the Commission was obligated to consider it. The Commission was directed to recall its order for the assessment years 2009-10 and 2010-11 for fresh disposal, leaving the specifics of the new order to the Commission's discretion.The Court highlighted that the Commission overlooked a crucial aspect that would impact the assessment orders, and neither the original order nor the rejection of the rectification application indicated that this factor was considered. The Court emphasized that the Commission should have considered this vital aspect, which warranted a recall of the settlement order. The Court refrained from substituting its judgment for that of the Commission, returning the settlement proceedings for those years for fresh disposal by the Commission.The petitioner was required to pay taxes by a specified date under the original order, with part payment already made. The Court directed that once a fresh settlement order is passed, the Commission should allow the petitioner a new time limit to fulfill any additional tax liabilities resulting from the fresh order, considering the taxes already deposited. The petition was disposed of with these observations and directions in place.