The Motor and General Finance Ltd v. Income Tax Officer, Ward 25(1) & Anr

1. The petitioner/assessee in these proceedings under Articles226/227 of the Constitution challenges a reassessment notice under Sections 147/148 of the Income Tax Act, 1961 (hereinafter to be referred as'the Act')proposing to reopen the completed assessmentfor AssessmentYear(AY)2010-11.

2. In the return filed on 01.10.2010,the concerned assessment years,the petitioner/assessee had set off unabsorbed depreciation to the tune of ?8,76,43,790/-, ofthe AY 2001-02. After notice was issued under Section 143(2) of the Act, the scrutiny assessment was framed, accepting 'nil' income. The impugned reassessment notice reads as follows:- W.P.(C)6375/2015 Page I of[4] 2017:DHC:8316-DB I "Reasonsfor the beliefthatincome has escaped assessment in the case of M/s. The Motor & General Finance Ltd. (PAN-AAACT2356D) for assessmentyear 2010-11. The assessee company has claimed and allowed setting off of unabsorbed depreciation of Rs.8,76,43,790/- of the assessment 2001-02 for assessment year 2010-11. The unabsorbed depreciation of the assessment year 2001-02 was carried forward and set off beyond eight years. Therefore, I have reason to believe that income of Rs.8,76,43,790/- has escaped assessment for assessment year 2010-11."

3. The petitioner contends that'reasons to believe' cannot stand the tes~^ ofprinciples enunciated by this Court as those governing valid reopening of assessment by the Supreme Court in Commissioner ofIncome Tax Vs. Kelvinator ofIndia Ltd.[2010]320ITR 561. It is submitted that besides the reassessment notice is also unsustainable because it proceeds on the understanding that set offofunabsorbed depreciation could not be claimed, in respect of past assessments, when the depreciation occasioned first prior to the amendment which was brought into force on 01.04.2002 to Section 32(2)ofthe Act. In so saying, the petitioner relies upon the Gujarat High Courtruling in GeneralMotorsIndiaPrivate Limited Vs. Commissioner of^ Income Tax[2013]354ITR 244. This decision was apparently followed by a latterjudgmentofthe GujaratHigh Court and ofa Bombay High Court.

4. The Revenue, on the other hand, submits that the reopening of assessment was occasioned by an audit objection and contends that the law is applicable atthe relevanttime posited that depreciation could be carried W.P. (C)6375/2015 Page 2of[4] further only for eight years. Since the eight years period ended before the AY 2010-11jthe assessee could nothave claimed the benefit at all. Under these circumstances,counsel for the Revenue submits thatthe reassessment notice is valid and cannotbe impeached.

5. The Kelvinator's case{supra)is as conclusive as any other precedent can be as to the considerations that can weigh with the Revenue for validly reopening any concluded assessmentthatthe assessee had claimed a setoff in terms ofthe then existing Section 32(2)ofthe Act in 2010-11 is not a disputed fact. The view taken by the Assessment Officer,apparently quite correctlyinthe lightofthesubsequentruling ofthe GujaratHigh Court,was thatsuch carryforward ofthe depreciationforthe pastyears wasnotlimited by the pre-existing Section 32(2) of the Act, which ceased to be on the Statute Book with effectfrom the date it was amended i.e.01.04.2002.

6. In these circumstances,in the absence ofany tangible material,which can be the only basis for reopening a completed assessment, the Revenue could not have issued the impugned notice. As to the applicability of General Motors India Private Limited's case {supra), the Court is ofthe opinion that the view taken is sound and an added factor inhibited the Revenue from reopening the assessment. The benefit ofcarrying forward the depreciation was,in one sense,limited bythe pre-existingrulingthatcan be done for eight years. All that amendment did with effect from 01.04.2002 was to remove the cap which meant that the previously limited benefit was now notsubjected to such restrictions. W.P.(C)6375/2015 3of[4] i} ■X

7. In the light of the foregoing discussion, the impugned notice cannot be sustained. It is hereby quashed alongwith all proceedings emanating therefrom. The writpetitionis allowedinthe above terms. The application bearing CMNo.11601/2015 also stands disposedoff.

S.RAVIND^BHAT,J. JANUARY 18,2017 sb NA4MIWAZIRI,X W.P.(C) 6375/2015 d, r. Page 4 of[4]