Ita/916/2007 Of M/S Mac Charles (India) Ltd v. The Asst Commissioner Of Income Tax

IN THB HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 22 DAY OF APRIL 2014. PRESENT THR HON'BLE MR.JUSTICE DILIP B.BHOSALE AN D THR HON'BLBE MR..JUSTICBK B.MANOHA ITA NO.916/2007 BBRHIWEE M/s.Mac Charles (India) Ltd.,No.28, Sankey Road,Bangalore — 560 052,Represented by its Managing Director,Ms Sangeetha C.Pardhanani,Aged about 39 years,D/o Sri.C.B.Pardhanani... Appellan(By Sri.S.Parthasarathi, Advocate)AN °The Asst. Commissioner of Income Tax,Circle — 12(1),14/3, Rastrothana Bhavan,4[/&]Floor, Nrupathunga Road,Opp. Reserve Bank of India,Bangalore — 560 O02..... Responden (By Sri.K.V.Aravind, Advocate) This ITA is filed under Sec.260-A ot Income TaxAct 1961, arising out of order dated 03-08-2007 passedin ITA No.296/Bang/2006, tor the Assessment Year1997-98, praying that for the reasons stated thereinthis Hon'ble Court may be pleased to: 1.formulate the substantial questions of lawstated therein,stated therein, ll.allow the appeal and set aside the order|passed by the ITAT Bangalore Bench-A inITA No.296/Bang/2006 dated 03-08-2007,in the interest of justice and equity.|passed by the ITAT Bangalore Bench-A inITA No.296/Bang/2006 dated 03-08-2007,in the interest of justice and equity.| This appeal coming on tor Hearing this day,B.MANOHAR Jhadelivered the following: JUDGMENT The assessee has filed this appeal under Section 260A of the Income-Tax Act, 1961 (for short °the Act")Challenging the order dated 3-8-2007 made in ITANo.296/2006 passed by the Income Tax AppellateTribunal, Bangalore Bench ‘A’ (for short °the Tribunal‘\whereby the Tribunal dismissed the appeal filed by theassessee while confirming the order passed by theCommissioner of Income Tax (Appeals) (for short |theFirstAppellateAuthorityryandtheAssessing Authority wherein the Assessing Authority rejected theapplication filed by the assessee under Section 194 ofthe Act for rectification of the assessment order dated|11-Q08-2004. 2 |The assessee is a Public Limited Companycarrying on the hotel business. The appellant-assesseefiled return of income for the assessment year 1997-98.on 19-11-1997 declaring the total income comprising ofincome from business, capital gain and other sources. —The said return was originally processed under Section143(1)(a) subsequently, it was revised under Section143(1)(b) to adjust the brought forward loss and.depreciations of the earlier years. The said order wasrectified under Section 194 of the Act by the AssessingOfficer on 26-10-1998 by allowing deduction undersection 8OHHD of the Act. On 23-3-1999, the assessee|filed an application to rectify certain mistakes whilecalculating deduction under Section 80HHD of the Act. — The said application was rejected by the AssessingAuthority on 8-9-1999. In the meanwhile, the case ofthe appellant was selected for scrutiny and noticesunder Section 142(1) and 143(2) were issued to theassessee. The assessee produced necessary documents,thereafter an assessment order was passed on 30[/&]March 2YOOO and a demand notice was issued to theassessee. The assessee being aggrieved by the saidassessment order, preferred an appeal before the FirstAppellate Authority. Further, the appellant also filed anappeal challenging the order dated 8-9-1999 rejectingthe application filed under Section 194 of the Act. Thesaid appeal was allowed by the First Appellate Authorityon 16-11-2000 and directed the Assessing Authority tore-compute the deduction in accordance with law. —Further the appeal filed by the assessee challenging theassessment order dated 30-3-2000 was also partlyallowed by the First Appellate Authority by its orderdated 19-2-2001. The assessee being aggrieved by the order dated 19-2-2001 passed by the First AppellateAuthority preferred an appeal before the Tribunal inappeal No.301/2001. The Appellate Tribunal by itsorder dated 27-4-2004, allowed the appeal directing theAssessing Officer to include the interest from Bill ofDiscount as income from business even for the purposeof computing deduction under Section 80HHD. order dated 19-2-2001 passed by the First AppellateAuthority preferred an appeal before the Tribunal inappeal No.301/2001. The Appellate Tribunal by itsorder dated 27-4-2004, allowed the appeal directing theAssessing Officer to include the interest from Bill ofDiscount as income from business even for the purposeof computing deduction under Section 80HHD. 3.|The Assessing Officer in order to give effect to theorder passed by the Tribunal as well as the FirstAppellate Authority, passed the revised assessmentorder on 11-8-2004 in accordance with the directions|issued by the Tribunal. The assessee filed an)application under Section 154 of the Act on 31-12-2004.for rectification of the revised assessment order dated|11-08-2004. After lapse of more than six months, the)said application was rejected by the Assessing Authorityon 2O[/&]October 2005. Being aggrieved by the said|rejection order, the assessee preferred an appeal before theCommissioneroT|Income-Tax|(Appeals)-III,Bangalore contending that the order passed by theAssessingAuthorityrejectingthe.applicationforrectification of mistake is contrary to law in view of non-passing of order on the said application within a periodof six months and the application is deemed to havebeen rectified. Hence, sought for allowing the appeal. 4The First Appellate Authority after considering thematter in detail, taking into consideration Section154(8) of the Act and also taking into considerationCircular No.14/2001 issued by the CBDT, rejected thesaid appeal by its order dated 20[/&]February 2006.Being aggrieved by the said order, the assesseepreferred an appeal before the Tribunal challenging thesame on various grounds. The Appellate Tribunal afterconsidering the matter in detail, dismissed the appealfiled by the assessee confirming the order passed by theAssessing Authority as well as the First Appellate Authority by its order dated 3-8-2007. Being aggrievedby the said order, the assessee has preferred thisappeal. 5The appeal is admitted to consider the followingsubstantial questions of law: (1)Whether the Tribunal was Justified inholding that the Assessing Authoritycan pass an order in respect of theapplication under Section 154 of the Actbeyond the period of six months, whenStatutorily there is no bar for passingthe order denying the benefit to theappellant beyond the period of threemonths. ?holding that the Assessing Authoritycan pass an order in respect of theapplication under Section 154 of the Actbeyond the period of six months, whenStatutorily there is no bar for passingthe order denying the benefit to theappellant beyond the period of threemonths. ? (it)Whether the Tribunal was Justified inimpliedly holding that the AssessingAuthority can set off the unabsorbeddepreciation by arriving at the profit forquantification of the relief under SectionSOHHD of the Act, contrary to thedecision of CIT(A) which had becomefinal for the relevant assessment year inthe appellant's own case. ?impliedly holding that the AssessingAuthority can set off the unabsorbeddepreciation by arriving at the profit forquantification of the relief under SectionSOHHD of the Act, contrary to thedecision of CIT(A) which had becomefinal for the relevant assessment year inthe appellant's own case. ? 6. We have carefully considered the argumentsaddressed by the parties and perused the impugnedorders and other relevant records. (it)Whether the Tribunal was Justified inimpliedly holding that the AssessingAuthority can set off the unabsorbeddepreciation by arriving at the profit forquantification of the relief under SectionSOHHD of the Act, contrary to thedecision of CIT(A) which had becomefinal for the relevant assessment year inthe appellant's own case. ?impliedly holding that the AssessingAuthority can set off the unabsorbeddepreciation by arriving at the profit forquantification of the relief under SectionSOHHD of the Act, contrary to thedecision of CIT(A) which had becomefinal for the relevant assessment year inthe appellant's own case. ? 6. We have carefully considered the argumentsaddressed by the parties and perused the impugnedorders and other relevant records. [|The records clearly disclose that in pursuance ofthe order passed by the Tribunal as well as the FirstAppellate Authority, the Assessing Authority in order togive effect to the said order, passed the revisedassessment order on 11-08-2004 giving deductionunder Section 8OHHD and also depreciation. Theassessee being dissatisfied with the deduction undersection 8O0OHHD, preferred an application under Sectio154 of the Act on 31-12-2004 for rectification of the|revised assessment order dated 11-8-2004. The|Assessing Authority aiter considering the application, byits order dated JO[/&]October 2005, rejected the sameholding that no further modification is required sincethe revised order has been passed pursuant to the order passed by the First Appellate Authority as well as theAppellate Tribunal. 8.|Being aggrieved by the said order, the assesseepreferred an appeal before the First Appellate Authoritycontending that the order passed by the AssessingAuthority is contrary to law. The order on Rectificationapplication has to be passed within a period of sixmonths. If no order is passed on the said application,the application is deemed to have been allowed. Theorder passed by the Assessing Authority is beyond theprescribed limit, hence, sought for setting aside thesame. The First Appellate Authority examined thematter in detail and held that the Assessing Authorityhas to pass a rectification order within a period of sixmonths from the end of the month in which, theapplication is received, to pass necessary order or rejectthe same. In the instant case, the Assessing Authorityhas passed the order after a lapse of six months. Under section 154 of the Act, it is mandatory requirement thatthe Assessing Authority has to pass the order within aperiod of six months from the date of receipt of theapplication. However, in the circular bearing No.73—dated 7-1-1972 issued by the CBDT it was clarified thatif the Assessing Authority do not dispose of theapplication within the time specified under sub-Section7 of Section 154, it may be disposed of by that authorityeven after expiry of the statutory time limit on merit inaccordance with law. Hence there is no infirmity in theorder passed by the authorities below. OQ With regard to the contention of the assessee thatif the Assessing Authority failed to pass order within theperiod of limitation prescribed and the rectificationdeemed to have been granted is concerned, there is nosuch provision under the Act. Hence no relief can begiven. Further, set off of brought forward loss is notChallenged in the appeal. The circular issued by the CBDT is binding on the authorities concerned. We findno infirmity or irregularity in the finding recorded by theFirst Appellate Authority as well as the Tribunal. All thethree authorities below concurrently held against theassessee and the finding recorded by the authoritiesbelow is purely a question of fact. Hence, the assesseeis not entitled for any relief in the appeal. Thesubstantial questions of law formulated in this appealare held against the assessee. Accordingly, we pass thefollowing: | ORDER The appeal is dismissed. No order as to costs. od/- JUDGE sd/-| JUDGE.