TaxTMI 
TaxTMI 
2019 (4) TMI 761
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....in the circumstances of the case and in law, the Ld. CIT(A) is right in directing the AO to allow set-off of carried forward depreciation of AY- 1997-98, 1998-99, 1999-2000 and 2000-01 from the income of AY 2007-08, 2008-09 and 2009-10, relying upon the decision of Confidence Petroleum India Ltd., when the appeal of the revenue in the case of Confidence Petroleum India Ltd., is pending with the Hon'ble Bombay High Court.? ii. "Whether on the facts and in circumstances of the case and in law, the Ld CIT(A) is right in relying on the circular no 14 of 2001, wherein it is mentioned that 'the Act has dispensed with the restriction of 8 years for carry forward and set off of unabsorbed depreciation', 'these amendments will take effect from the 1st April, 2002, and will, accordingly, apply in relation to the assessment year 2002-2003 and subsequent years'? iii. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in directing the AO to allow set-off of carried forward depreciation as per the explanatory memorandum to the Finance (No. 2) Bill, 1996 which states that 'in case of succession in business and amalgamation ....
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....sequently issuance of notice u/s 148 dated 24.03.2015 by the AO to the assessee, which reasons were furnished to the assessee by the AO vide letter dated 18.08.2015, which are reproduced hereunder:- "The assessee has e-filed the return of income on 02.04.2015 declaring income of Rs. Nil/-. a). The details and information available on record shows the assessee entered into purchase transactions with the following persons during the year who are involved in the providing accommodation entries: Sr. No Name of the party from whom assessee shown purchases Amounts (Rs.) 1. Lahree Impex 14,60,369/- 2. Siddhivinayak Corporation 1,456/- Total 14,61,825/- b). The name(s) of the above person(s) was also appearing in the list of Hawala Dealers who provided the bills without delivery of actual goods, made available in the public domain in the official website of the Maharasthtra Sales Tax Department. Before the Sales Tax Authorities the Proprietor/Partner/Director of the supplier concerns have stated on Oath that they have not physically purchased or sold any goods and they have merely issued bogus bills of purchase/sale. In view of the abo....
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....n from petty cash account. It was claimed that the purchases made from both these parties were genuine purchases. The assessee furnished before the AO copies of bills issued by these parties which also carried their VAT/CST/TIN details w.r.t. their registrations with Sales Tax/VAT department. The extract of ledger accounts of these parties as were appearing in assessee's books of accounts were also submitted. The copies of bank statement evidencing payment by cheques to M/s Lahree Impex were enclosed . Similarly copies of petty cash book extracts wherein payment to Siddhivinayak Corporation was reflected was enclosed. The assessee also submitted note on utilisation of the material received from these parties for its business. The assessee also claimed that auditors of the assesssee has not given any adverse remarks while certifying its accounts. The prayers were made that these are genuine purchases and hence no disallowance be made. The assessee also relied upon case laws which found mentioned in assessment order to contend that no additions are warranted on the factual matrix of the case. 3.4 The AO after considering the submissions of the assessee was of the view that these p....
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....rmed the additions to the income of the assessee to the tune of 25% of these alleged bogus purchases which were added to the income declared by the assessee, by summarising his findings by holding as under, vide reassessment order dated 17.03.2016 passed by the AO u/s 143(3) read with Section 147 of the 1961 Act: "a). The primary onus is no (sic. on) the assessee to establish the genuineness of the purchases claimed by it. As per section 101,102 and 106 of Evidence Act, the onus lies upon the assessee to prove all the claims including purchases to satisfaction of the AO. Which was not discharged by the assessee as it failed to produce the parties from whom purchases were made. Since the primary facts are in knowledge of the assessee, it is its duty to provide the correct address or contact modes of' the alleged suppliers. This view is supported by the decision of Hon'ble Raj High Court of India (2002) 178 CTR (Raj) 420 MP High Court in the case of VISP (P) Vs. CIT Indore(2004) 186 CTR 218 (MP). b). Mere filing of copies of purchase bills without any documentary evidence in support of purchases and payment through account payee cheque cannot be conclusive in a case where g....
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....incumbent on the assessee to produce these parties along with their necessary documents to establish the genuineness of the transaction as these parties were not found at the given address. It is really surprising that all the parties were not found in existence on the given addressee nor was it produced by the assessee before the undersigned to get the claim of purchases verified. j), There is a specific finding of Maharashtra Sales Tax Department that these parties had issued false bills without delivery of goods. Such findings cannot be overlooked. k). Thus, undisputed fact is that the purchases claimed to have been made for these parties remained unverified. l). Reliance is also placed on the following judgments in favour of Revenue a). CIT vs. La Medico, 177 Taxman 628 (2001) (Delhi) b). Sumati Dayal Vs.CIT 214 ITR 801 (SC)(1995) c). CIT Vs. Durga Prasad More 1973 CTR (SC) 500: (1971) 821 ITR 540 (SC). m). Further, in the case of M/s. Vijay Proteins Ltd Vs. ACIT 58 ITD 428 (1996) /55 TTJ 76 (AHD), the Hon'ble I.T.A.T, Mumbai have stated as under: "it is well know that purchases are made from open market without insisting for the ge....
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....ce of stock register, books of accounts it is not possible to verify which goods were sold to the parties whose sales confirmation was submitted by the assessee. Assessee is also unable to correlate the same. vii). In fact, self-interest talks in all sorts of tongues and plays all sorts of roles. The indifference of not producing the party which issued the bill is indicative of the truth. The Revenue is not doubting all the purchases but doubting only those purchases for which the genuineness could not be proved. One cannot lose sight of the fact that dark deeds are performed under the cover of darkness and direct evidence can never be available sometimes the facts speak loud and clear. 12. The amount shown as paid to the bogus parties comes back to the assessee as no purchases are made from them. The cash so received back is available for financing subsequent purchases from undisclosed parties in cash. It is apparent from the facts that the assessee has employed the above mentioned modus operandi. Therefore, 25% of purchases standing in the name of the bogus/ hawala party is to be added as unexplained expenditure U/S.69C of the I.T. Act, which are of Rs. 14,61,82S/- (i.e.25%....
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....d AO /CIT(A). The learned DR would rely on decision of Hon'ble Supreme Court in the case of N K Protiens Limited v. DCIT reported in (2017) 250 taxman 22(SC) to contend that additions be enhanced to 100% as when the said AO framed assessment, he was not having benefit of the aforesaid judgment of Hon'ble Apex Court. It was submitted by learned DR that notices issued u/s 133(6) of the 1961 Act returned un-served and these parties are untraceable. It was submitted by learned DR that even the assessee could not produce these parties before the authorities below for verification. 5.2 The assessee has filed written submissions through its counsel which are placed in file. It is claimed that the assessee had accepted additions to the income of the assessee to the tune of 12.5% of alleged bogus purchases as was confirmed by Ld. CIT(A) and no appeal is filed by the assessee with tribunal against the appellate order dated 24.04.2017 passed by learned CIT(A). It is also claimed that Ld. CIT(A) for earlier year AY 2009-10 has also confirmed additions to the tune of 12.5% of alleged bogus purchases while the AO made additions to the tune of 100% of alleged bogus purchases. It was submitted ....
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....as attained finality. The reasons as were recorded by the Revenue stipulated that the assessee has availed accommodation entries from persons indulging in issuance of bogus purchase and sale bills without actual delivery of goods. The sales tax department has stated that purchases to the tune of Rs. 14,61,825/- made by the assessee are bogus purchases. This led to reopening of the concluded assessment by AO u/s 147 of the 1961 Act. The reasons for reopening were recorded by the AO which were furnished to the assessee by the AO vide letter dated 18.08.2015, which are reproduced hereunder:- "The assessee has e-filed the return of income on 02.04.2015 declaring income of Rs. Nil/-. a). The details and information available on record shows the assessee entered into purchase transactions with the following persons during the year who are involved in the providing accommodation entries: Sr. No Name of the party from whom assessee shown purchases Amounts (Rs.) 1. Lahree Impex 14,60,369/- 2. Siddhivinayak Corporation 1,456/- Total 14,61,825/- b). The name(s) of the above person(s) was also appearing in the list of Hawala Dealers who provi....
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....produced by the assessee before the AO. The assessee has consistently claimed that these purchases are genuine. The assessee however could not produce delivery challans, transport bills, octroi receipts etc to prove delivery of goods. It was also observed by the authorities below that in order to complete books of accounts, accommodation bills were procured from these parties. In the opinion of the authorities below , the cheques were issued by the assessee to these parties wherein cash was returned back by these parties to the assesssee after deducting their commission. As per authorities below, the cash so received back by the assessee from these hawala dealers is utilised for procuring material from grey market in cash. The authorities below also observed that payments have been made after substantial delays which also shows that back dated bills were arranged from these hawala dealers without getting any delivery of material and these are all bogus purchases. It is also observed by the authorities below that the parties from whom the assessee procured material from grey market does not pay any sales tax/income-tax etc to government and hence the prices of the product are low wh....
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....eged bogus purchases. The Revenue has itself accepted holding of additions to the tune of income of 12.5% of alleged bogus purchases as held by learned CIT(A) for AY 2009-10 and no appeal was filed by Revenue with tribunal on this issue for AY 2009-10. It is pertinent to mention that the AO made additions to the income of the assessee to the tune of 100% of alleged bogus purchases for AY 2009-10 which was reduced to 12.5% by learned CIT(A). The learned DR is asking us to enhance income to 100% of alleged bogus purchases as against additions to the income to the tune of 25% made by the AO for the impugned assessment year , for which learned DR is obliged to show perversity in the assessment order of the AO with clinching, conclusive and cogent incriminating material on record which in our considered view the learned DR failed to show. The AO took a plausible view which is not a perverse view. At this stage based on the material on record and a plausible view taken by authorities below, we are not inclined to relegate assessee to another round of litigation. Thus, based on our above discussions, we are in agreement with the authorities below that under these circumstances profits emb....
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....21004962 12409517 8595445 The assessee has sought to set off the loss of Rs. 1,24,09,517/- in this year and set off it against business income of Rs. 1,24,09,517/- and filed 'Nil' Return of income. The AO observed that these set off loss was already claimed as set off in AY 2006-07, 2007-08, 2008-09 and 2009-10. The AO asked the assessee to provide list of un-absorbed depreciation brought forward, set off and carry forward since 1998-99 till AY 2010-11. The assessee submitted the details as under:- 7.2. The AO observed that the revenue has already disallowed set off of un-absorbed depreciation in the earlier years as per orders of the AO are as under:- 7.3 The AO observed that as per provisions of Section 32 of the Act, unabsorbed depreciation can be carried forward for indefinite period and can be set off against any heads of income except income under the head salaries. The AO observed that but for assessment years 1997-98 to 2001-02, unabsorbed depreciation cannot be carried forward for more than eight years immediately succeeding the assessment year for which the loss was first computed and set off against any other heads of income except income under the head bu....
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.... the Assessing Officer, the submissions of the appellant and case laws cited carefully. The first issue is whether unabsorbed depreciation for AY 2001-02 and earlier years can be carried forward and adjusted as part of current depreciation in AY 2010-11. No doubt the special bench of the ITAT in the case of Times Guarantee Ltd. (2010) 40 SOT 14 (Mum) hold that the unabsorbed depreciation for AY 2001-02 and earlier years are governed by the extant law and cannot be carried forward beyond 8 years, the same was over ruled by the Gujarat High Court. The view that it can lie carried forward without this restriction has now been followed in several decisions, some of which are listed below. General Motors India Pvt. Ltd. vs. DCIT (354 ITR 244) Abacus Distribution (India) (P) Ltd. vs. DCIT 159 TTJ 156 (MUM) Confidence Petroleum India Ltd. vs. DCIT (ITA No. 1937/Mum/2011) (Mum ITAT) Hindustan Unilever Ltd. vs. ACIT 22 ITR (Trib.) 737 (Mum) Arch Fine Chemicals v. SCIT (IT Appeal Nos. 2414 & 2415/Mum/2012) (Mum ITAT) 5.4. In the case of Confidence Petroleum, the Hon'ble ITAT Mumbai Bench in their order dated 24-07-2013 held as under "2.2.Before us, Authorised Represe....
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....epreciation to be carried forward beyond period of eight yeas. For the AY under consideration, correct law applicable was the law that prevailed as on the first day of April of that AY. In our opinion during the assessment year under consideration, amended provisions were applicable and AO was supposed to calculate the un-absorbed depreciation as required by the Act. In our opinion, there was no bar to allow the un-absorbed depreciation of the earlier years in the AY 2007-08. We find that similar issue has been discussed and decided by the Hon'ble High Court of Gujarat on 23.08.2012.,i n the case of General Motors India Pvt. Ltd. in following manner : " "30. The last question which arises for consideration is that whether the unabsorbed depreciation pertaining to AY. 1997-98 could be allowed to be carried forward and set off after a period of eight years or it would be governed by Section 32 as amended by Finance Jet 2001? The reason given by the Assessing Officer under section 147 is that Section 32(2) of the Act was amended by Finance Act No.2 of 1996 w.e.f. AY. 1997-98 and the unabsorbed depreciation for the A.Y. 1997-98 could be carried forward up to the maximum period o....
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....ion is allowed on any motor car manufactured outside India unless it is used (i) in the business of running it on hire for tourists, or (ii) outside in the assessee's business or profession in another country. 30.4 The Act has allowed depreciation allowance on all imported motorcars acquired on or after 1st April, 2001. 30.5 These amendments will take effect from the 1st April, 2002, and will, accordingly, apply in relation to the assessment year 2002-03 and subsequent years." 37.The CBDT Circular clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The amendment is applicable from assessment year 2002-03 and subsequent years. This means that any unabsorbed depreciation available to an assessee on 1st day of April, 2002{A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001 and not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to....
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....uch succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered opinion that any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordant with the provisions of section 32(1) as amended by Finance Act, 2001. And once the Circular No. 14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y 1997-98 up to the A. Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and ware available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever." Therefore, reversing the order of the FAA, effective Ground of appeal is decided in favour of the assessee-company." 5.5. Same view was taken by the Hon'ble ITAT Mumbai Bench in their order dated 9-10-2013 in the case of Arch Fine Chemicals Pvt Ltd. In these decisions, the Hon'ble ITAT followed the decision of the Gujarat H....
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....r eight years for set off. The Ld. DR submitted that this unabsorbed depreciation of Rs. 1,24,09,517/- pertained to assessment 1998-99, 1999-2000 to 2000-01 and can only be allowed to be carry forward for eight years only. It was submitted that ITAT Mumbai Special Bench in the case of Times Guarantee Limited (2010) 40 SOT 14 (Mum) has held that the unabsorbed depreciation relatable to this period can only be allowed to be carried forward for a period of eight years. It was , however, fairly submitted by learned DR that Hon'ble Gujarat High Court in the General Motors India P. Ltd.(Supra), has held that unabsorbed depreciation for AY 1997-98 to 2001-02 can be allowed to be carried forward for unlimited period even for this intervening period. It is fairly brought to our notice by learned DR that ITAT Mumbai in Confidence Petroleum India P. Ltd., v. DCIT in ITA no. 1937/Mum/2012 did not follow the decision of Special Bench of Mumbai-tribunal in the case of Times Guarantee Limited (2010) 40 SOT 14 (Mum) and chose to follow the decision of Hon'ble Gujarat High Court in the case of General Motors India P Ltd.(supra) and granted relief to the tax-payer. 9.2 The assessee has filed writ....
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....l High Court with regard to this question held as under: "6. Regarding question No. 7 (a) The impugned order of the Tribunal has allowed the respondent - assessee's appeal on the issue of allowing unabsorbed depreciation pertaining to Assessment Year 1996-97 and 1997-98 which was carried forward to be set off in the subject Assessment Year. (b) The grievance of the Appellant is that in view of the fetter (of eight years) in carrying forward depreciation for Assessment Year 1997-98 upto Assessment Year 2002-03, The set off of the same cannot be allowed in this Assessment year. (c) We find that the impugned order of the Tribunal while allowing the Assessee - respondents' claim follows the decision of the Gujarat High Court in General Motors India (P) Ltd v. Dy. CIT [2013] 354 ITR 244/[2012] 210 Taxman 20/25 taxmann.com 364 wherein on identical facts it was held that the unabsorbed depreciation for the Assessment Year 1997-98 upto Assessment Year 2001-02 could be allowed to be set off, if it was still unabsorbed on 1st April, 2001 The above decision also placed upon the CBDT circular No. 14 of 2001 dated 22nd November 2001 to hold that any u....
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....98 , un-absorbed depreciation could have been carried forward for the period of eight years . Prior to this the position was that un-absorbed depreciation was allowed to be carried forward for unlimited period. This position once again changed vide Finance Act, 2001 wherein unabsorbed depreciation was allowed to carry forward and set off for unlimited period wef AY 2002-03. We have observed that Mumbai-tribunal has elaborately discussed this issue in assessee's own case for AY 2009-10 in ITA 4961/Mum/2016 , vide orders dated 17.04.2018 and relief was granted to the assessee by following the decision of Hon'ble Gujarat High Court in the case of General Motors India Private Limited(supra), by holding as under: "6. We have heard the rival submissions, perused the orders of the authorities below. We find that that the Assessing Officer while completing the assessment denied the setoff of unabsorbed depreciation relevant to Assessment Years 1997-98 and 2000-2001 for the reason that such unabsorbed depreciation can be carried forward only to eight Assessment Years immediately succeeding Assessment Year for which the loss was first computed and setoff against any other heads of income.....
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....that the unabsorbed depreciation for the Assessment Year 1997-98 upto Assessment Year 2001-02 could be allowed to be set off, if it was still unabsorbed on 1st April, 2001 The above decision also placed upon the CBDT circular No. 14 of 2001 dated 22nd November 2001 to hold that any unabsorbed depreciation which is available on 1st day of April, 2001 would be dealt with in accordance with the provisions of Section 32(2) of the Act as amended by the Finance Act of 2001. Moreover, the Circular No. 14 of 2001 issued by The CBDT clarifies that restriction of eight years to carry forward and set off the unabsorbed depreciation has been dispensed with Consequently, unabsorbed depreciation for the intervening periods between assessment 1997-98 upto 2001 -02, if available in the assessment year 2002-03 would be allowable as part of carried forward depreciation from Assessment Year 2002-03 onwards No decision contrary to the decision of the Gujarat High Court has been shown to us. It is clarified that although the decision of the Gujarat High Court was rendered in context of re-opening notice it has also examined the issue on merits and drew support from the CBDT circular which is beneficial....