AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 363
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....hether the Income Tax Appellate Tribunal is right in holding that the provision for deferred tax liability as per AS 22 issued by the Institute of Chartered Accountants of India is an unascertained liability under Explanation (c) to sub-section (2) of Section 115JB for the purpose of computing minimum alternate tax, despite the standard being mandated by Section 211(3C) of the Companies Act, 1956? 3. In view of the submissions made by the learned counsel for the Appellant/Assessee and the learned counsel for the Respondent/Income Tax Department, we proceed to frame the following supplementary question of law as Substantial Question of Law No.4:- 4. Whether the Appellant/Assessee was precluded from pursuing the remedy under Section 154 of the Act, merely because an Appeal under Section 246A of the Act was filed subsequently before the Appellate Commissioner against the same assessment order against which the Appellant/Assessee had earlier filed application under Section 154 of the Act? 4. When the case was taken up for further hearing, the learned counsel for the Appellant/Assessee submitted that the Appellant/Assessee is not pressing the Substantial Question of Law N....
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....ncome on 29.10.2004 for the Assessment Year 2002-2003. (vii) However, the revised Return of Income that was filed on 29.10.2004 for the Assessment Year 2002-2003 was filed beyond the statutory period of limitation under Section 139(5) of the Act. (viii) The revised Return of Income was actually filed pursuant to a Notice dated 16.04.2003 issued to the Appellant/Assessee under Section 143(2) of the Act before the regular Return of Income filed by the Appellant/Assessee on 31.10.2002 for the Assessment Year 2002-2003 was scrutinized. (ix) The Appellant/Assessee thus offered income from the sale of land as taxable income, since the land sold to its subsidiary company was converted into stock-in-trade and since the exemption claimed under Section 47A of the Act was withdrawn by the Appellant/Assessee. (x) While offering the aforesaid capital gains from the sale of land to its subsidiary company as taxable income, the Appellant/Assessee claimed to set off the unabsorbed depreciation that had remained unutilized from the Assessment Year 1999-2000 against the tax liability from the aforesaid capital gains under Section 32 read with Section 72 of the Act....
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....ns in the Assessment Year 2002-2003. 10. During the course of hearing, the learned counsel for the Appellant/Assessee stated that once an order on a particular issue had been passed by the Assessing Officer under Section 154 of the Act, it was not open for the Appellate Commissioner to re-look into the same and that the Appellate Commissioner should have treated the appeal in so far as that issue is concerned as not pressed for. 10.1. It is further submitted that the Appellate Commissioner ought not to have passed an order adverse to Order dated 25.08.2005 of the Assessing Officer passed under Section 154 of the Act. 10.2. The learned counsel for the Appellant/Assessee would submit that even on merits, the Tribunal has committed an error in disallowing the claim for setting-off the tax liability arising out of long term capital gains against the unabsorbed depreciation which had remained unutilized. 10.3. It is submitted that the only remedy that was available to the Department was under Section 263 of the Act before the jurisdictional Commissioner of Income Tax in the exercise of the revisional power given to the Judicial Commissioner under the Act. 10.4. It is subm....
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....n could be set off against the income from any other head, if the unabsorbed depreciation could not be wholly set-off under sub-clause 1 to Section 32(2) of the Act. However, this was not available with effect from 01.04.2002 i.e., from Assessment Year 2002-2003. 11.5. Therefore, it is submitted that during the period in dispute, there was no scope for allowing the unabsorbed depreciation to be set off against the income arising from capital gains and therefore the impugned order of the Tribunal does not merit any interference. 11.6. The learned counsel for the Respondent/Income Tax Department summarized his submissions as follows:- (i) The Appellant/Assessee cannot file an appeal against Order of an Assessing Officer when the issue is already before the Assessing Officer under Section 154 of the Act, notwithstanding the fact that Appellant/Assessee may or may not secure an Order under Section 154 of the Act. (ii) There is no scope for pursuing a petition under Section 154 Act once an appeal is filed against the same Assessment Order. (iii) There is no scope for allowing the unabsorbed depreciation for being set-off against the income arising from c....
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..... Rectification of mistake.- (1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,- (a) amend any order passed by it under the provisions of this Act; (b) amend any intimation or deemed intimation under sub-section (1) of section 143;]] (c) amend any intimation under sub-section (1) of section 200A;] (d) amend any intimation under sub-section (1) of section 206CB.] (1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.] (2) Subject to the other provisions of this section, the authority concerned - (a) may make an amendment under sub-section (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice [by the assessee or by the deductor,....
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.... passed Order only under the following four circumstances namely:- 1. amend any order passed by it under the provisions of this Act; 2. amend any intimation or deemed intimation under subsection (1) of section 143; 3. amend any intimation under sub-section (1) of section 200A; 4. amend any intimation under sub-section (1) of section 206CB 20. An Order can be made under the Section 154 of the Act by the Income Tax Authority referred to in Section 116 of the Act only with a view to rectify the mistake apparent from the face of record in the Order that was earlier passed. It has to be borne in mind that an application under Section 154 of the Act is confined only to rectify an error apparent on the face of record. The machinery under Section 154 of the Act is not intended to be used as a substitute for an appeal. 21. Under no circumstances, an application under Section 154 of the Act can be allowed to be transformed into an appeal in dis-guise. This position stands clarified by several decisions of the Court. Reference can be made to the following decision of the Courts:- (i) CIT Vs. Hero Cycles (P) Ltd [1997] 94 Taxman 271 (SC); ....
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....y or the Revisional Authority, as the case may be. 28. Therefore, the Original Authority cannot rectify an order after the appellate authority or the revisional authority has passed an order. However, that restriction in sub-section (1A) to Section 154 of the Act cannot be interpreted to mean that if an application is filed under 154 of the Act, the authority who has passed the order sought to be rectified is not empowered to rectify the error apparent on the face of the record merely because an appeal or revision is pending, before the Appellate or the Revisional Authority as the case may be. The Original Authority can exercise the power vested with them under Section 154 of the Act, before the Appellate or the Revisional Authority as the case may be passes an Order within their domain. 29. The Original Authority before whom such an application is filed has to merely see whether the application is indeed filed for rectification of error apparent on the face of record and is not appeal in disguise. 30. It is not open for the Respondent/Income Tax Department to contend that if an appeal is pending before the Appellate Commissioner under Section 246A of the Act or any other ....
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.... is wide enough to confirm, refuse, enhance or annul the assessment. 38. It is clear that the Appellate Commissioner Order while disposing an appeal under Section 251(1)(a) of the Act may confirm, refuse, enhance or annul the assessment. 39. The only caveat under Section 251(1)(a) of the Act is such enhancement has to be in respect of an issue which was the subject matter of the Assessment order notwithstanding the fact that it was not raised before the Appellate Commissioner by the Assessee. All that is required is a reasonable opportunity of being heard by way of a Show Cause Notice. This is evident from a reading of sub-bvsection (2) to Section 251 of the Act. Section 251(2) of the Act reads as under:- "251. Powers of the Commissioner (Appeals).- (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers- (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enchance or to reduce the penalty; (c) in any other case, he may pass such ....
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....sment, he can enhance the assessment (Commissioner of Income-tax, Punjab v. Nawab Shah Nawaz Khan (1938) 6 ITR 370. In this context reference may be made to the decision of the Court of Appeal in The King Vs. Income Tax Special Commissioners [1936] 1 KB 487 in which the taxpayer sought to withdraw a notice, of appeal which had been given on his behalf against an additional assessment under Sch. D. The Commissioners of Inland Revenue were not satisfied that the assessment was adequate. The Special Commissioners then proposed to proceed with the hearing of the appeal in the ordinary way. At that stage the taxpayer sought a writ of prohibition to prohibit the Special Commissioners from hearing the appeal. It was held by the Court of Appeal that notice of appeal having once been given, the Commissioners were bound to proceed in accordance with the Income-Tax Acts and determine the true amount of the assessment. At page 493 of the Report Lord Wright observed as follows : " -in making the assessment and in dealing with the appeals, the Commissioners are exercising statutory authority and a statutory duty which they are bound to carry out. They are not in the position of judges d....
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.... justified in re-looking the same irrespective of the Order passed under Section 154 of the Act. 44. The Income Tax Department is not required to involve the machinery under Section 263 of the Act by the Jurisdictional Commissioner for holding that the consequential Assessment Order passed was erroneous and prejudicial to the interest of the Respondent/Income Tax Department. 45. Therefore, we answer the 4th Substantial Question of Law as above by holding that the powers of the Appellate Commissioner under Section 251 of the Act are wide enough to include and to look into issues which was the subject matter of the Assessment Orders and Orders passed under Section 154 of the Act. DECISION ON THE SUBSTANTIAL QUESTION OF LAW NO.2:- 46. We now proceed to answer the Substantial Question of Law No. 2 i.e., Whether the Tribunal was justified in upholding the Order of the Appellate Commissioner in so far as the order fails to recognize the claim of the Appellant/Assessee to set off the unabsorbed depreciation from the Assessment Year 1999-2000 against the profits arising from the long term capital gains in the Assessment Year 2002-2003. 47. The Impugned Order dated 18.05.2007....
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....arned Counsel for the Appellant/Assessee relied on the followings decisions of the Courts:- (i) CIT Vs. Hickson and Dadajee (P) Ltd, 2020 122 Taxmann 94 (SC) (ii) CIT Vs. Pioneer Asia Packing (P) Ltd, (2008) 170 Taxman 127 (Madras) (iii) CIT Vs. S & S Power Switchgear Ltd, (2009) 318 ITR (Madras) (iv) CIT Vs. S & S Power Switchgear Ltd., (2019) 111 Taxmann 95 (Madras) (v) Bond Safety Beits (Dissolved) Vs. DCIT (2023) 156 Taxmann 222 (Bombay) 55. As per Section 32(1) of the Act inserted by the Income Tax (Amendment) Act, 1998 as in force with effect from 01.04.1998, an assessee is entitled for deduction of depreciation in respect of the following:- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed. 56. As per Section 32(2) of the Act as amended by Finance Act, 2000 with effect from 01.04.2001, where in the assessment of the assessee, full effect cannot be given to any a....
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....ollowing previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years. 58. Both amended and unamended Section 32(2) of the Act are reproduced below:- Section 32(2) of the Income Tax Act, 1961 Section 32(2) of the Act amended by Finance Act, 2000 with effect from 01.04.2001 Section 32(2) of the Act substituted by the Finance Act, 2001 with effect from 01.04.2002 (2) Where in the assessment of the assessee full effect cannot be given to any allowance under clause (ii) of sub section (1) in any previous year owing to there being no profits or gains chargeable for that previous year or owing to the profits or gains being less than the allowance, then, the allowance or the part of allowance to which effect has not been given (hereinafter referred to as unabsorbed depreciation allowance), as the case may be:- (i) shall be set off against the profits and gains, if any, of any business or profession carried on him and assessable for that assessment year; (i) if the unabsorbed depreciation allowance cannot be wholly set off....
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.... to the provision of the Income Tax Act are not retrospective unless expressly provided in the amendment itself. If the provision as it stood between 01.04.2001 to 31.03.2002 is applied to the facts of the case there is no doubt that the Appellant/Assessee was entitled to set of the unabsorbed depreciation against any other income in view of Section 32(2)(ii) as it stood between 01.04.2001 to 31.03.2002. 60. What is relevant is the provision as it stood between 01.04.2001 and 31.03.2002 for Assessment Year 2002-2003. The amendment to Section 32(2) of the Act with effect from 01.04.2002 will be relevant only for Assessment Year 2003-2004 for the relevant Previous Year 2002-2003. 61. In the revised Return of Income filed on 29.10.2004 for the Assessment Year 2002-2003, the Appellant/Assessee had declared the business income as Rs.4,24,86,856/-. However, the Assessing Officer had also questioned the computation of the long term capital gains arising from the sale of land and building to its subsidiary. 62. The following table discloses the method adopted by the Appellant/Assessee and by the Department to arrive at the aforesaid long term capital gain of Rs. 2,96,47,500/- and ....