2022 (2) TMI 482 - AT - Income Tax

Tribunal quashes reassessment, upholds CIT(A)'s decision on unabsorbed depreciation carry forward.

The DCIT, Corporate Circle -1 Versus M/s Maheswara Sugars Limited

The Tribunal quashed the reassessment as the reopening beyond four years was barred by limitation. It upheld the CIT(A)'s decision allowing the carry ... Reopening of assessment u/s 147 - reopening was beyond 4 years - unabsorbed depreciation disallowed - HELD THAT:- As gone through the reasons recorded as well as original assessment order. We noted that the reasons for reopening and the issue examined by the AO in original assessment proceedings are exactly the same. There is no difference. As we have already extracted the reasons recorded as well as the finding of the AO in original assessment proceedings, we could not point out what is the failure of the assessee to disclose fully and truly the material facts for completion of assessment of the assessee. Even on merits the CIT(A) has categorically held that the assessee is eligible for carry forward of depreciation for the assessment year 2002-03 to 2004-05. - Decided against revenue. Issues Involved:1. Legality of reopening the assessment beyond four years under Section 147 of the Income Tax Act, 1961.2. Merits of the claim for carry forward of unabsorbed depreciation for the assessment years 2002-03 to 2004-05.Detailed Analysis:1. Legality of Reopening the Assessment Beyond Four Years:The primary issue in this case revolves around the legality of reopening the assessment for the assessment year 2006-07 beyond four years under Section 147 of the Income Tax Act, 1961. The original assessment was completed under Section 143(3) on 25.03.2008, and the reassessment notice under Section 148 was issued on 27.02.2013, which is beyond the four-year limit.The assessee argued that the reopening was without jurisdiction as all relevant details regarding unabsorbed depreciation were available during the original assessment. The assessee contended that there was no omission on its part to disclose material facts fully and truly. The Tribunal noted that the reasons for reopening were based on the same facts available during the original assessment and no new tangible material was brought on record. The Tribunal referred to the proviso to Section 147, which restricts reopening beyond four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts.The Tribunal cited the Supreme Court's decision in CIT vs. Foramer France (264 ITR 566) and the Madras High Court's decision in CIT vs. RPG Transmissions Ltd. (48 taxmann.com 57), which held that reopening beyond four years is not permissible if there is no failure on the part of the assessee to disclose material facts. The Tribunal concluded that the reopening was barred by limitation and quashed the reassessment.2. Merits of the Claim for Carry Forward of Unabsorbed Depreciation:On the merits of the case, the Commissioner of Income Tax (Appeals) [CIT(A)] had allowed the assessee's claim for carry forward of unabsorbed depreciation for the assessment years 2002-03 to 2004-05. The CIT(A) observed that the assessee's factory was not in operation during these years due to reasons beyond its control, but the machinery was part of the block of assets and depreciation was allowable.The Tribunal upheld the CIT(A)'s decision, citing judicial precedents that supported a liberal interpretation of the term 'used' in the context of depreciation. The Tribunal referred to decisions such as CIT vs. Travancore Chemicals & Mfg. Co. Ltd. (142 Taxman 316) and CIT vs. Vayithri Plantations Ltd. (128 ITR 675), which held that forced idleness of machinery does not disentitle the assessee from claiming depreciation. The Tribunal also cited the jurisdictional High Court's decision in CIT vs. Chennai Petroleum Corporation Ltd. (37 taxmann.com 332), which held that depreciation is allowable even if the machinery could not be put to use due to extraneous circumstances.The Tribunal concluded that the assessee was eligible for carry forward of unabsorbed depreciation for the assessment years 2002-03 to 2004-05, and the Revenue's appeal on this ground was dismissed.Conclusion:The Tribunal quashed the reassessment on the grounds of reopening beyond four years being barred by limitation and upheld the CIT(A)'s decision allowing the carry forward of unabsorbed depreciation. The appeal filed by the Revenue was dismissed.