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Judgment
A.K. Sikri, J.—In both these appeals issue involved is identical. These appeals pertain to the same Assessee and the issue which has cropped up relate to assessment years 2000-01 and 2001-02. For the sake of convenience, we may take note of the facts which appear in ITA 97/ 2009 as that appeal relates to the prior assessment year namely assessment year 2000-01.
The Assessee had filed Income Tax Return showing losses. Since losses under the normal provisions were much higher than the loss computed as per the book profit u/s 115JA of the income tax Act (hereinafter referred to as the ''Act), this return was processed u/s 143(1) of the Act and was completed on 7th March, 2002 after accepting the return as filed. The Assessing Officer, however, issued notice u/s 154/143(1) of the Act as according to him a mistake apparent on the face of record had occurred while accepting the return vide assessment orders dated 7th March, 2002. We may point out here that the Assessee had incurred losses in earlier years which remained unabsorbed and were being carried forward to successive assessment years. Likewise, there was unabsorbed depreciation as well. In the year in question, there were profits and as per the Assessing Officer the unabsorbed depreciation available for set off against the profits in this assessment year was just Rs. 80,38,600/- instead the figure of Rs. 1,39,36,000/- which was earlier taken as unabsorbed depreciation. Thus, the Assessing Officer passed orders dated 16th May, 2005 thereby allowing brought forward unabsorbed depreciation at '' 80,38,6000/-instead of Rs. 1,39,36,000/-. The Assessee challenged this order by filing appeal before the CIT (A). In the first instance it was submitted by the Assessee that it was not a mistake apparent on the face of record and, therefore, could not be corrected in exercise of jurisdiction u/s 154 of the Act. It was also submitted that in any case the aforesaid figures taken by the Assessing Officer, were incorrect. According to the Assessee, the unabsorbed depreciation of Rs. 1,39,36,000/- was rightly brought forward and adjusted in this year. The CIT (A), however, dismissed the appeal of the Assessee. Aggrieved by this order, the Assessee preferred second appeal before the ITAT. The Tribunal has accepted the contention of the Assessee and held that the adjustment made by the AO for the intimation issued u/s 143(1) of the Act by way of a rectification order in respect of unabsorbed depreciation was beyond the scope of Section 154 of the Act. Thus, the Assessing officer had no power to take recourse to the provisions of Section 154 of the Act.
Mr. Vohra, learned Counsel for the Respondent Assessee has pointed out the circumstances under which the adjustment of Rs. 1,39,36,000 was made against the profits in the assessment year 2000-01. He has pointed out that in the immediate previous year i.e. in the assessment year 1999-2000, there were profits and the return was filed under the normal provisions and not u/s 115JA of the Act. At the same time, there were unabsorbed losses and unabsorbed depreciation of previous year which were carried forward to this year. He has clarified that in so far as unabsorbed depreciation is concerned, it was Rs. 1,39,36,000/-. The profits of the assessment year 1999-2000 were set off against the carried forward losses of the previous year which were more than 15 crores. Even after absorbing the entire profits of the year 1999-2000, against the carried forward losses, losses still remained unabsorbed and the unabsorbed depreciation was not even touched. This figure of unabsorbed depreciation i.e. Rs. 1,39,36,000/- remained as it is and it is under these circumstance, this figure was carried forward to the assessment year in question and this is how in the returns filed, the amount of unabsorbed depreciation of Rs. 1,39,36,000/-was set off being the lower of the two namely unabsorbed losses and unabsorbed depreciation, having regard to Clause (iii) to the Explanation of Section 115JA of the Act. According to him, in these circumstances, the exercise carried out by the Assessing Officer while rectifying the order was not permissible. In the process of doing so, the Assessing Officer has treated Rs. 1,39,36,000/ - as unabsorbed depreciation to be set off against the profits earned in the year 1999-2000 and after setting off those profits, he has assumed that the carried forward depreciation would be Rs. 80,38,600/-. It is on this basis, it is argued that it is not an error apparent on the face of record and rather it depends on the interpretation that has to be given to Clause (iii) of the Explanation to Section 115JA of the Act and such an exercise was not permissible u/s 154 of the Act. Furthermore, it is argued, it amounts to even disturbing the assessment in respect of assessment year 1999-2000 which could not be done even while making regular assessment of assessment year 2000-01.
The aforesaid contention of Mr. Vohra carries sufficient strength. However, in an attempt to mollify the same, Mr. Sahni had produced the copies of the assessment in respect of assessment year 1999-2000 and submitted that the MAT computation done by the Assessee itself in that year and assured that the carried forward depreciation was 80,38,600/-'' only. For this purpose, he referred to the following computation and given by the Assessee in the assessment years 1999-2000:
Assessment year 1999-2000
As on 01.04.1998 (as per books)
(i)Unabsorbed Depreciation
Rs. 1,39,36,000
(ii)Brought Forward '' Business Loss (excluding depreciation)
Rs. 14,21,44,000
MAT COMPUTATION DONE BY ASSESSEE
Profit as per Profit and Loss Account
Rs. 58,98,000
Less: lower of Unabsorbed Depreciation And brought forward business loss
( Rs. 1,39,36,000)
[As per explanation
(ii) of the second proviso to Section 115JA(2)]
....
Book Profit
Rs. (80,38,000)
On this basis it was claimed that in the next assessment year, the Assessing Officer has rightly corrected the error u/s 154 of the Act by setting Off Rs. 80,38,600 instead of Rs. 1,39,36,000/-. This plea of Mr. Sahni is not correct. Mr. Sahni has only picked up the MAT computation done by the Assessee in that year but knowing the fact that in that year the Assessee had earned profits and actually it was only brought forward business loss of the previous year which was adjusted and unabsorbed depreciation of Rs. 1,39,36,000/- remained as it is without any adjustment. The manner in which the computation was done in the assessment years 1999-2000, 2000-01 and 2001-2002 is reproduced below which would clearly demonstrate that unabsorbed depreciation was in fact Rs. 1,39,36,000/- which was allowed to be set off in the assessment year 2000-01 while passing the original assessment order:
Assessment year 1999-2000
as on 01.04.1998 (as per books)
(i) Unabsorbed Depreciation
Rs. 1,39,36,000
(ii)Brought Forward Business Loss (excluding depreciation)
Rs. 14,21,44,000
MAT COMPUTATION DONE BY ASSESSEE
Profit as per Profit and Loss Account
Rs. 58,98,000
Less: lower of Unabs orbed Depreciation And brought forward business loss
( Rs. 1,39,36,000)
[As per explanation (ii) of the second proviso to Section 115JA(2)]
....
Book Profit
Rs. (80,38,000)
As on 31.03.199 (as per books'')
(iii) Unabsorbed Depreciation
Rs. 1,39,36,000
(iv)Business Loss (excluding depreciation) to be carried forward
Rs. 13,62,46,000*
*[ Rs. 14,21,44,000-
Rs. 58,98,000]
Aggregate Loss
Rs. 15,01,82,000
Assessment Year 2000-01
MAT COMPUTATION DONE BY ASSESSEE
Profit as per Profit and Loss Account
Rs. 1,23,00,504
Add: Provision for Doubtful Debts . -
Rs. 3,49,292
Add: Provision for Doubtful Advances
Rs. 3,21,696
Less: lower of Unabsorbed Depreciation And brought forward business loss
( Rs. 1,39,36,000)
[As per explanation (ii) of the second proviso to Section 115JA(2)]
....
Balance Profit
Rs. (9,64,508)
As on. 31.03.2000 (as per books)
(v)Unabsorbed Depreciation
Rs. 139,36,000
(vi)Business Losses (excluding depreciation) to be carried forward
Rs. 12,39,45,496*
*[ Rs. 13,62,46,000-
Rs. 1,23,00,504]
Aggregate Loss
Rs. 13,78,81,496
Assessment Year 2001-02
MAT COMPUTATION DONE BY ASSESSES
Profit as per Profit and Loss Account
Rs. 1,19,99, 177
Less: lower of Unabs orbed Depreciation and brought forward business loss
( Rs. 1,39,36,000)
[As per explanation (ii) of the second proviso to Section 115JA(2)]
....
Book Profit
Rs. (19,36,823)
As on 31.03.2001
(vii)Unabsorbed Depreciation
Rs. 1,39,36,000
(viii)Business Losses (excluding depreciation) to be carried forward
Rs. 11,19,46,319*
*[ Rs. 12,39,45,496-
Rs. 1,19,99,177]
Aggregate Loss
Rs. 12,58,82,319
When this is the position and the assessments were done in this manner it could not be stated that there was an error which could be corrected by invoking the provisions of Section 154 of the Act. The Assessee had claimed the set off Rs. 1,39,36,000 in terms of Explanation III (of (2) proviso to Section 164 JA (2) of the Act) as against the brought forward loss as per the books at Rs. 15,01,82,00/-. Thus, the matter related to the interpretation of the effect which is to be given to the aforesaid provision and, therefore, it was not a mistake which was to be corrected for which jurisdiction u/s 154 of the Act could be exercised, as held by the Apex Court in Apollo Tyres Ltd. Vs. Commissioner of Income Tax, Kochi, and T.S. Balaram, Income Tax Officer, Company Circle IV, Bombay Vs. Volkart Brothers, Bombay, .
We, thus do'' not find any merits in these appeals. No question of law arises. These appeals are accordingly dismissed.