The order of the Bench was delivered by
R.P. TOLANI, JM:-Both these appeals have been filed by the assessee against two separate orders of the ld. CIT(A), Alwar dated 11-02-2013 u/s 154 and dtd. 01-03-2013 u/s 143(3) of the Act for the assessment year 2001-02 respectively.
2.1 In ITA No. 481/JP/2013, the assessee has raised following ground.
‘’Action of ld. CIT(A) in confirming the action of the AO in not allowing carry forward of loss of Rs. 2,90,78,830/- is unjust, illegal, arbitrary and against the facts and circumstances of the case.’’
3.1 In ITA No. 481/JP/2013, the assessee has raised following grounds.
‘’1. Action of ld. CIT(A) in confirming the action of the AO in passing the order u/s 154 of the I.T. Act without giving a reasonable opportunity of being heard is unjust, arbitrary and against the facts and circumstances of the case.
2. Action of ld. CIT(A) in confirming the action of the AO in disallowing the carry forward of loss of Rs. 2,90,78,830/- is unjust, arbitrary and against the facts and circumstances of the case.’’
4.1 Brief facts of the case are that the assessee has filed the return of loss on 28-12-2011 declaring loss of Rs. (-) 2,90,78,830/- which was processed u/s 143(1) on 22-03-2002. Since the return has been filed beyond the specified limit for filing the return u/s 139 (1), the aforesaid loss was not allowed to be carried forward to the subsequent assessment year. Assessee filed application u/s 154 of the I T Act claiming it as a mistake and for its rectification.
4.2 Apropos other appeal, the AO while processing the return u/s 143(1) rejected assessee's claim for carried forward of losses on the ground that return was filed belated and did not qualify for carried forward of losses.
The assessee preferred rectification application u/s 154 of the Act which was rejected by the AO by following observation:-
‘’The assessee has filed application u/s 154 on 3-06-2002 received in this office on 7-06-2002 alongwith BIFR order dated 22-11-200 stating therein that the AO has not allowed carried forward losses to the a while company was taken over by the new Management. The audit for the F.Y. 97-98, 98-99 and 99-2000 was pending. Therefore, Hon'ble Bench of BIFR has directe4d to the new promoter at page no. 8 para No E(II) as follows:-
To allow the new management to file various returns/ forms and any other related documents viz. income tax, central excise, customs, provident fund, ESI, register of companies, department of explosive and any other central government authorities etc. on or before 31-12-2000 ad not to impose any interest penalty, fine etc. on account of delay due to closure of the factory. The assessee company further submitted that pending audit could not be completed upto 31-12-2000 therefore, Hon'ble BIFR has further extended the above period upto 31-12-2001 and the return for the year was filed on 28-12- 2001 within the time period as extended by the Hon'ble Bench of BIFR.
An opportunity letter was issued on 19-07-200 fixing the case for hearing on 26-07-2002. On this date, the assessee neither attended nor filed any specific evidence of yearwise permission given by BIFR for the above assessment year.
After considering the assessee's submission and the BIFR order dated 22-11-2000 brought forward losses cannot be allowed in view of Section 139(3) of the I.T. Act, 1961 because loss in any previous year under the profit and gain of business can be carried forward only if the return is furnished within the time allowed under sub-section (1) of Section 139. The assessee failed to furnish return within the time allowed u/s 139(1). Moreover, as per CBDT circular no. 576 circulated by CBDT, New Delhi the assessee company is not entitled to the benefit of extension of date of filing of return claimed by it.
Hence, application u/s 154 of the I.T. Act , 1961 is hereby rejected.’’
4.3 The assessee preferred first appeal which was dismissed by the ld. CIT(A) by observing as under: -
‘’I am inclined to agree with the AR of the appellant that the AO has erred in following the CBDT New Delhi circular No. 576 since this circular dated 31.08.1990 had been withdrawn vide circular No. 683 dated 08.06.1994. I have considered the order of the Hon’ble BIFR dated 22-11-2000 and 06.09.2001 by which the date for filing various returns before Income Tax and other Central Government Departments mentioned in para- 6E(ii) has been extended from 31.12.2000 to 31.12.2001.
However, on going through the order of the Hon’ble BIFR dated 22-11-2000 and the sanctioned scheme in BIFR case No. 34/92 circulated with said order it is noted that the reliefs and concessions have been provided for the period prior to 31.03.2000, since the cutoff date as per para-6 of the Scheme is 31.03.2000. The relief has been worked out in light of the closure of the company from lsl June 1998 till 31st March 2000 and the change of management of the company by inclusion of a new co-promoter Captain K.S.Solanki. Although the scheme provides for allowing the new management to file various returns before Income Tax Department, and to allow the company to carry forward and set-off of the investment allowance and unabsorbed depreciation / unabsorbed losses for all the years during which the revival scheme is implemented, the assessment years to which the scheme is applicable has not been mentioned separately. Considering that the cut-off date of scheme has been stated as 31.03.2000, it is held that the scheme would be applicable up to FY 1999-2000 i.e. upto AY 2000-01 and it would not be applicable for AY 2001-02 which relates to the FY 2000-01.
Considering the above discussion, it is held that the AO was correct in rejecting the application filed u/s. 154 of the Act and in holding that the assessee/ appellant was not eligible for the carry forward and set-off of loss claimed in the return filed for the AY 2001- 02. The ground No. 1, 3 & 4 are dismissed.’’
4.4 In the meanwhile assessee’s case was selected for scrutiny and assessment was completed u/s 143(3) making various additions and it’s claim for carried forward losses was rejected in scrutiny assessment also as the return of income was filed beyond the prescribed limit u/s 139(1)of the Act.
4.5 Aggrieved, the assessee preferred first appeals wherein the ld. CIT(A) on merits upheld the order of the AO passed u/s 143(3) by following observations.
‘’11.The ground No. 11 is against not allowing carry forward of business loss assessed by the AO.
11.1The AO has observed that the assessee has filed return of loss on 28-12-2001 declaring a loss of Rs. 290,78,830/-. Since the return was filed beyond the time limit specified for filing the return u/s. 139(1), the aforesaid loss was not allowed to be carried forward in the processing u/s. 143(1) on 22.03.2002. The AO has assessed total loss at Rs. 266,72,673/- and has not allowed this loss to be carried forward, in assessment order dated 31.03.2004.
11.2 The AR of the appellant has submitted in the course of hearing that rectification application u/s. 154 was filed against the intimation dated 22-03-2002 which was rejected by the AO. On this issue further appeal has been filed before this office. It has been submitted that the Income Tax return was filed as per provisions of the Scheme sanctioned by Hon’ble BIFR on 22.11.2000 and as per its order No. 18(4)/l/B.III/BIFR/Mon/2001 dated 06.09.2001 and carry forward of loss assessed should be allowed.
11.3 I have considered the assessment order and submissions made by the AR. I have also considered the order of the Hon’ble BIFR dated 22.11.2000 and 06.09.2001 by which the date for filing various returns before Income Tax and other Central Government Departments mentioned in para- 6E(ii) has been extended from 31.12.2000 to 31.12.2001.
The appeal against order u/s. 154 of the AO has been decided by me against the appellant in order dated 11.02.2013 in appeal No.235/2002-03.
Even on merits, on going through the order of the Hon’ble BIFR dated 21.11.2000 and the sanctioned Scheme in BIFR case No. 34/92 circulated with said order I find that the reliefs and concessions have been provided for the period prior to 31.03.2000, since the cut-off date as per para-6 of the Scheme is 31.03.2000. The relief has been worked out in light of the closure of the company from 1st t June 1998 till 31st March 2000 and the change of management of the company by inclusion of a new co-promoter Captain K.S.Solanki. Although the scheme provides for allowing the new management to file various returns before Income Tax Department, and to allow the company to carry forward and set-off of the investment allowance and unabsorbed depreciation / unabsorbed losses for all the years during which the revival scheme is implemented, the assessment years to which the scheme is applicable has not been mentioned separately.
Considering that the cut-off date of scheme has been stated as 31-03-2000, it is held that the scheme would be applicable up to FY 1999- 2000 i.e. upto AY 2000-01 and it would not be applicable for AY 2001-02 which relates to the FY 2000-01. Accordingly, it is held that the appellant can not take shelter of the above said orders of the Hon’ble BIFR and the return filed on 28.12.2001 can not be said to have been filed as per the time limit specified u/s. 139(1) of the Act since due date of filing the return u/s. 139(1) was 31.10.2001. The order of the AO, in not allowing the carry forward of assessed loss for AY 2001-02, is upheld and this ground is dismissed.’’
4.6 Aggrieved, the assessee is before us in both the appeals.
4.7 The ld. Counsel for the assessee contends that if assessee's appeal on merit is allowed then the appeal u/s 154 of the Act will become infructuous. On facts it is contended that the assessee company was promoted by Rajasthan State Industrial Development & Investment Corporation Ltd. (for short ‘’RIICO) and IDL. IDL disposed off its shareholding in the company in favour of Shri Rajesh Jain. As per audited accounts as on 31st March, 1991, the company’s net worth was eroded by its accumulated losses. The company filed a reference in the BIFR and was declared ‘Sick’ by BIFR in 1992. A scheme for the rehabilitation of RECL was sanctioned by the BIFR on 3-05-1994 under the Sick Industrial Companies (Special Provisions) Act, 1985. The scheme was subsequently modified on 10-05-1996. The modified scheme also failed to revive the company. Thereafter, the offer has been received through advertisement by BIFR for taking over RECL. After comparing the offers, a fresh scheme by way of change of Management (COM) of the company through induction of a new management under Capt. S.K. Solanki, was sanctioned by the BIFR on 22-11-2000 (SS-2000). The Board appointed State Bank of Bikaner & Jaipur as the Monitoring Agency to monitor the progress of implementation of SS-2000. The scheme, inter alia envisaged payment of dues of Financial Institutions, restructuring of dues of State Bank of Bikaner & Jaipur and payments to the various statutory authorities. The cut off date (COD) was considered in the sanctioned scheme on 31-03-2000. The cost of the scheme estimated to be Rs. 820 lakhs was proposed to be financed by fresh promoter’s contribution in the form of equity capital Rs. 570 lakhs, realization of dues from Coal India Ltd. Rs. 50 lakhs and internal accruals Rs. 200 lakhs. The scheme inter alia provided for payments to, and certain reliefs and concession form, Govt. of India, Govt. of Rajasthan, RIICO etc as mentioned in clause 6DGovernment of Rajasthan and 6E-Govt. of India. In SS-2000, the new promoter has been advised to arrange for audit of accounts for the year ended March 31,1998, 1999 and 2000 refer to clause 6(I)(i) of SS 2000. The date of filing of various returns was given 31-12-2000 refer to clause 6(E)(ii) of SS 2000. However, due to misplacement of record, theft during closure of company from 1998-2000, the accounts could not be prepared/ audited. In the meeting of BIFR held on 16-08-2001, the submission was made by RECL ‘’that the company was required to file various return with different Govt. agencies by December 2000 as envisaged in the scheme. Since the accounts would be finalized by Sept. 2001 and thereafter adopted in the AGM, he requested that the date of filing of such return be extended upto Dec. 2001. The Bench has considered the said request and directed that the company would file a formal request with the Board for extending the date of filing of various return with different Govt. agencies upto 31-12-2001. Accordingly, a request was made by RECL to BIFR for extension of time limit vide letter dated 18-08-2001. BIFR has allowed the date of filing of return from 31-12-2000 to 31-12-2011 vide their approval letter dated 06- 09-2011.
4.8 Consequent to revival, the assessee filed the return of impugned assessment year on 28-12-2001 declaring loss of Rs. (-) 2,90,78,830/- which was processed u/s 143(1) of the Act. The AO while making an adjustment rejected assessee's claim for carried forward of losses which a subject matter of appeal No. 481/JP/2013. Thereafter the notice u/s 143(2) was issued and scrutiny assessment was completed after making some disallowances and reiterating the stand of rejection and carried forward of losses.
4.9 The ld. Counsel for the assessee contends that claimed carry over losses which included two type of claims.
(i) Carry over business losses.
(ii) Carry over unabsorbed depreciation
The ld. Counsel for the assessee pertinently mentioned that for assessment year 2000-01 also return of income was filed beyond the stipulated time u/s 139(1) of the Act and in that year also the AO did not allow carried forward of losses. The assessee filed an application u/s 154 of the Act for rectification of this mistake in not allowing carried forward of losses which was rejected by the AO vide order dated 28-11-2002. The facts are similar to year in question.
4.10 Aggrieved, the assessee preferred first appeal for AY 2000-01 where the ld. CIT(A) allowed assessee's appeal vide his order dated 11-02-2013 by following observations.
‘’4.3 I have considered the order of the AO and submissions made by the AR. The appellant has filed return of income for AY 2000- 01 on 28.12.2001 although the due date of filing the return u/s. 139(1) was 30.11.2000. The AO has issued an intimation u/s. 143(1) of the IT Act dated 22,03.2002 with returned total income of Rs. (-) 237,75,700/-, and amount pavabie/refundable as nil with a note that ilic above loss is not allowable id be carry forwarded to further next year as return of income is not filed within due time as specified in section 139(1.) read with section 139(3) of the Act, 1961.
(A) The AO has passed an order u/s. 154 on 28.11.2002 and has rejected the application received from appellant u s. 154 on 07.06.2002 on the folling grounds:-
(i) After considering the assessee’s submission and the BIFR order dated brought forwarded losses can not be allowed in view of the section 139(3) of the IT Act since return of income was not furnished within time allowed u/s. 139(1).
(ii) As per CBDT, New Delhi circular No. 576, the assesses company is not entitled to the benefit of extension of date of filing return of income. The assesses has not filed any specific evidence of year-wise permission given by the BIFR for above assessment year.
I am inclined to agree with die AR of the appellant that the AO has erred in following the CBDT New Delhi circular No. 576 since this circular dated 31,08,1990 had been withdrawn vide circular No, 683 dated 08,06.1994, I have considered the order of the Hon’ble BIFR dated 22.11.20(10 and 06.09.2001 by. which the date for filing various returns before Income Tax. and other Central Government Departments mentioned m para- 6E(ii) has been extended from. 31.12.2000 to 31.12.2001.
Further, on going through the order of the Hon’ble BIFR dated 22,11.2000 and the sanctioned scheme in BIFR case No. 34/92 circulated with said order it is noted that the reliefs and concessions have been provided for the period prior to 31.03.2000, since the cutoff date as per para-6 of the Scheme is 31.03.2000. The relief has been worked out in light, of the closure of the company from 1st June 1998 till 31st March 2000 and the change of management of the company by inclusion of a new to- promoter Captain K.S.Solanki. The scheme provides for allowing the new management to isle various returns before Income Tax Department, and to allow the company to carry forward and set-off of the Investment allowance and unabsorbed depreciation / unahsorbed losses for all the years during which the revival scheme is implemented, the assessment years to which the scheme is applicable has not been mentioned separately.
Considering that the cut-off dale of scheme has been stated as it is held that the scheme would be applicable up to FY 1999- 2000 i.e. upto AY 2000-01. Further, in view of section 32(1) of the Sick Industrial Companies (Special Provisions) Act 1985, the Rules or Schemes made under the said Act would have and over-riding effect over provisons of the Act. Therefore, the return filed fbr AY 2000-.01 on 28.12.2001 is to be cnsidered as filed as per the sanctioned Scheme and the order of the BIFR. Accordingly, the carry forward and set-off of unahsorbed depreciation/ unabsorbed losses, investment allowance etc. has to be allowed in terms of para-6E(iv) of the sanctioned Scheme and BIFR order dated 22.1.2000,
Considering the above discussion, it is held that the AO was not correct in rejecting the application filed u/s. 154 of the Act and in holding that the assessee/ appellant was not eligible for the carry forward and set-off of loss claimed in the return filed for the AY 2000-01. The AO is directed to delete the note given in the intimation u/s. 143(1) of the Act stating that “the above loss is not allowable to carry forwarded to further next year as return of income is not filed within due time as specified in section 139(1) read with section 139(3) of IT Act, 1961”' and allow necessary relief to the appellant. The ground No. 1, 3 & 4 are allowed on above terms.
(13) The second ground regarding not providing proper opportunity of being heard had become iniructuous and academic in nature in view of the relief provided above. The same is rejected.’’
4.11 The ld. Counsel for the assessee contends that this order of the ld. CIT(A) allowing carried forward of losses in assessment year 2000-01 has been accepted by the Revenue as no further appeal is filed. The facts and circumstances of the case for assessment year 2000-01 are similar to the year in question i.e. AY 2001-02 wherein impugned appellate orders have been passed by the ld. CIT(A) in appeal u/s 154 on 11-02-2013 and u/s 143(3) on 01-03-2013. As a matter of fact, the same CIT by two separate orders of the date for the assessment year 2000-01 and 2001-02 has taken two opposite views while deciding the appeal AO’s respective orders u/s 154 of the Act. Since the order for the assessment year 2000-01 has been accepted by the Revenue, there is no justification on the part of the ld. CIT(A) in not following his own order of the same date on the same facts and circumstances of the case. In assessment year 2001-02, it has been clearly held that the provisions of Sick Industrial Companies (Special Provisions) Act, 1985, the Rules or Scheme made under the said Act would have an overriding effect over the provisions of the I.T. Act. On the same date in other order, this categorical rule finding has been given go-bye for no justifiable reasons since the Revenue has accepted this order. The appeal in this behalf may be allowed.
4.12 On merits, it is contended that the issue whether the assessee shall be entitled for carried forward losses and set off in subsequent year shall be decided by the AO who makes the subsequent assessment. Therefore, there is no justification on the part of the AO to refuse the claim of carried forward of losses when set off is claimed. Reliance is placed in the case of Lodhi Property Co. Ltd. vs. CIT, (ITAT Delhi Bench) 36 SOT (2010) 128 (ITA No. 2267/Del/2009) wherein the Bench has observed as under:-
‘’13. Section 24(3) of the Act, 1922 is analogous to section 157 of the present Act under which the Income-tax Officer has to notify to the assessee the amount of loss as computed by him. Therefore, the present Assessing Officer determining the loss shall only determine the quantum of the loss incurred in the present assessment year and shall notify the same to the assessee and whether this loss shall be eligible to be set off against the profit of subsequent assessment year cannot be decided by him, and it is only Income-tax Officer dealing with the assessment of the subsequent assessment year in which any claim of set-off of loss is made by the assessee to decide whether the assessee shall be entitled to set off of the loss of the present assessment year against the profit and gains of business of subsequent assessment year as so observed by the Hon'ble Supreme Court in the aforesaid case of Manmohan Das (supra). We, therefore, hold that the Assessing Officer's order is erroneous and prejudicial to the interest of revenue to the extent the Assessing Officer has made an observation that loss to be carried forward. The expression “to be carried forward” mentioned by the Assessing Officer in his assessment order is undoubtedly rendering the assessment order erroneous and prejudicial to the interest of revenue. The issue whether the assessee shall be entitled to carry forward and set-off of this loss in any subsequent year shall be decided by the Assessing Officer of the subsequent assessment year, in which such claim is made by the assessee. In this respect, therefore, the ld. CIT was very much justified in holding that the assessment order is erroneous and prejudicial to the interest of revenue insofar as the observation to the effect “loss to be carried forward” made by the Assessing Officer is concerned and he, accordingly, was justified in setting aside the assessment on the above issue to be made afresh after giving opportunity of being heard to the assessee. ‘’
4.13 It is further contended that in any case the claim of unabsorbed depreciation is to be allowed irrespective of belated filing of the return. Reliance is placed in the case of CIT vs. Govind Nagar Sugar Ltd. (2011) 343 ITR 13 wherein the Hon'ble High Court has observed as under: -
‘’16. We have already noted above that Section 32 deals with the different types of depreciation whereas Section 80 deals with carried forward of unabsorbed losses other than losses on account of depreciation. If that was not so, there was no need for Legislature to prove specific provision for carrying forward of depreciation u/s 32 of the Act. It has already been noted that in case of Nagapatinam Import & Export Corpn.(supra) which was relied by our High Court in the case of J Patel &Co. (supra) whereby it was held that Section 72 contemplates loss other than unabsorbed depreciation and there was a time limit within which loss can be adjusted, whereas in the case of unabsorbed depreciation there is no time limit and further that under the statute there is a separate identity with respect to unabsorbed depreciation though at the time of computation, it becomes a part of loss.
17. From the above, it comes out that the effect of Section 32(2) is that unabsorbed depreciation of a year becomes part of depreciation of subsequent year by legal fiction and when it becomes part of current year depreciation it is liable to be set off against any other income, irrespective of the fact that the earlier years return was filed in time or not.’’
4.14 The ld. DR relied on the order of the ld. CIT(A).
4.15 We have heard the rival contentions and perused the materials available on record. We may first advert to assessee's appeal in 481/JP/2013. It has not been accepted disputed by the Revenue that ld. CIT(A)’s order in assessment year 2000-01 has been accepted by the Revenue. We see no justification in ld. CIT(A)’s order for the assessment years 2000-01 and 2001-02 passed on the same date i.e. 11-02-2013.By elaborate finding, the ld. CIT(A) has held in assessment year 2001-02 that Sick Industrial Companies (Special Provisions) Act, 1985, the Rules or Scheme was incorporated to revive the Sick Companies and bring from mess of losses and rigor of various other Acts. This fact has also not been disputed by the ld. DR. The order of the ld. CIT(A) has been accepted by the Revenue in assessment year 2001-02. It has not been disputed that facts and circumstances of the case for 2001-02 are same. Therefore, we see no deviation from the legal position which has been accepted by the Revenue in assessment year 2000-01 and in this eventuality the judgment of Hon'ble Supreme Court in the cases of Radhaswami Satsang vs. CIT , 193 ITR 321 (SC) and CIT VS. Vatika Township (P) Ltd. 367 ITR 466 (SC) for the proposition of maintaining the consistency of the stand of Revenue on same facts and circumstances enunciated. In view thereof, we hold that ld. CIT(A) ought to have followed his order in A.Y. 2001-02 and allowed assessee's application u/s 154 of the Act being the mistake pointed out therein. Thus the appeal of the assessee in ITA No. 482/JP/2013 is allowed.
4.16 Adverting to appeal on merits also we find merit in the assesse’s reliance on Delhi ITAT judgment in the case of Lodhi Properties Ltd. (supra) holding that the present Assessing Officer determining the loss shall only determine the quantum of the current year loss. Whether the losses so quantified shall be eligible to be set off against the profit of subsequent assessment year cannot be decided by him. It’s is only AO dealing with the assessment where any claim of set-off is eligible for set off of the loss will decide as observed by the Hon'ble Supreme Court in the case of Manmohan Das 59 ITR 699. The issue whether the assessee shall be entitled to carry forward and set-off of this loss in any subsequent year shall be decided by the AO framing the assessment of such subsequent assessment year, in which claim of set off of loss is made by the assessee. This view if further supported by Hon’ble P&H High Court in CIT v. Haryana Hotels Ltd. 276 ITR 521. Respectfully following these judgments, we hold that since no claim of set off of loss is made by the assessee in this year the action of AO in rejecting to allow carry forwarded is not tenable as it preempts the future quasi-judicial powers of the AO who has to actually set off of the loss if and when there are profits. Therefore, the remarks/ findings of the ld. AO denying claim of carryover of earlier losses and unabsorbed depreciation are expunged. The legality of claim of set off will be considered by AO who will deal with the aspect of set off. Thus the grounds of the assessee to this extent are allowed.
4.17 Since we have decided this issue on merits, the assessee's appeal No. 482/JP/2013 becomes infructuous as contended by assessee. Thus in view of the above deliberations, appeal no. 481/JP/2013 of the assessee is allowed and no. 482/JP/2013 is dismissed.
5.0 In the result, appeal no. 481/JP/2013 of the assessee is allowed and no. 482/JP/2013 is dismissed.
The order pronounced in the open court on 12/02/2016.