A C I T - 14(1) Room No. 202, 2nd Floor Earnest House, Nariman Point Mumbai 400021 Vs. M/s. R.K. Exports 80/82, 1st Floor, 3rd Bhoiwada Bhuleshwar, Mumbai 400002
May, 26th 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" Bench, Mumbai
Before Shri D. Manmohan, Vice President
and Shri Sanjay Arora, Accountant Member
ITA Nos. 7482&7483/Mum/2013
(Assessment Years: 2003-04 & 2004-05)
A C I T - 14(1) M/s. R.K. Exports
Room No. 202, 2nd Floor 80/82, 1st Floor, 3rd Bhoiwada
Earnest House, Nariman Point Bhuleshwar, Mumbai 400002
PAN - AAAFR2666M
Appellant by: Shri Sanjay Punglia
Respondent by: Shri Lalchand Choudhary
Date of Hearing: 21.05.2015
Date of Pronouncement: 21.05.2015
Per D. Manmohan, V.P.
These appeals by the Revenue are directed against the orders passed by
CIT(A)-25, Mumbai and they pertain to A.Y. 2003-04 and 2004-05. Since the
issues are common in both the years, we proceed to dispose of these appeals
by a common order for the sake of convenience.
2. Following grounds were urged before the us in both the appeals: -
"1. On the facts and in the circumstances of the case and in law, the
Ld. CIT(A) has erred in allowing the appeal filed by the assessee
which resulted in carry forward of excess loss on account of
2. On the facts and in the circumstances of the case and in law, the
Ld. CIT(A) has erred in allowing depreciation on D.G. Set @80%
instead of @25% allowable as per I.T. Act, 1961.
3. For the above mentioned reason and any other reasons that may
be urged at the time of hearing it is requested that the order of the
CIT(A) be quashed and that of the A.O. be restored."
3. Facts necessary for disposal of the appeals are stated in brief.
Assessee is a partnership firm and is engaged in the business of
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manufacture of glass beads. It filed its return of income for A.Y. 2003-04 on
01.12.2003 and the same was processed under section 143(1) of the Act.
Thereafter the case was selected for scrutiny and order was passed under
section 143(3) of the Act on 28.12.2005 admitting the loss declared by the
assessee. The loss of `1,49,45,682/- on account of unabsorbed depreciation
was allowed to be carried forward.
4. After completion of the assessment AO sought to rectify the order passed
under section 143(3) of the Act, based upon certain audit objections; an order
under section 154 dated 26.03.2012 was passed disallowing the excess
depreciation of `39,11,123/- claimed by the assessee and thereby rectifying the
loss on account of unabsorbed depreciation to `1,10,34,559/- only.
5. It may be noticed that the order under section 143(3) was passed on
28.12.2005 whereas the order under section 154 of the Act was passed on
26.03.2012, i.e. beyond a period of four years. Therefore assessee challenged
the order passed by the AO before the CIT(A) contending, inter alia, that the
order was passed in violation of provisions of section 154(7) of the Act. Even
on merits it was submitted that the AO was not justified in taking a view
that the additional depreciation could not be allowed where a report in Form
3AA is not available on records, by overlooking the fact that availability of
report at any time before completion of assessment would be sufficient
compliance and in fact the assessment under section 143(3) was made after
due consideration of the report in Form 3AA and relevant material available
6. The learned CIT(A) accepted the plea of the assessee on both counts.
In this regard he observed as under: -
"5.5 I have perused the original assessment order u/s 143(3),
rectification order u/s 154, written submissions of the appellant, and
facts and circumstances of the case. I find that there is merit in the
contentions of the appellant that the rectification order passed by AO is
time barred. Section 154(7) reads as "Save as otherwise provided in
section 155 or sub-section (4) of section 186, no amendment under this
section shall be made after the expiry of four years from the end of the
financial year in which the order sought to be amended was passed."
The appellant's case does not fall in the exclusions under section 154(7),
hence the said limitation period of four years is clearly applicable. In the
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M/s. R.K. Exports
present case, the order sought to be amended i.e. assessment order u/s
143(3) was passed on 28.12.2005, which falls in financial year 2005-
06, hence the limitation period upto which the same can be rectified u/s
154 ends on 31.03.2010, as rightly claimed by the appellant. In this
regard, the argument of the AO that the assessee itself had requested
for rectification for A.Y. 2004-05 which was also time barred and hence
the assessee cannot bend the rules for his benefit and have a different
view for one year and different for another, cannot withstand the test of
law. Even assuming that the assessee would have made a time barred
claim for another assessment year, it could have been dealt with
separately as per law; but the same could not be taken as basis for
another assessment year to overrule the express provisions of law.
Hence, I hold that the rectification order passed by AO was time barred
u/s 154(7) of the Act, and hence quashed."
7. Aggrieved by the order of the CIT(A), Revenue is in appeal before the
Tribunal. It may be noticed that even for A.Y. 2004-05, on same lines as
indicated above, AO sought to pass an order under section 154 on
14.02.2012 and thereafter on 27.03.2012. Here also the learned CIT(A)
observed that rectification order under section 154 was passed just to give
consequential effect to rectification order passed for A.Y. 2003-04. Since the
order passed under section 154 for A.Y. 2003-04 is quashed, consequential
order passed for A.Y. 2004-05 was also quashed for the same reasons.
8. Revenue preferred an appeal before the Tribunal against the order
passed by the learned CIT(A) for A.Y. 2004-05.
9. At the time of hearing the learned D.R. fairly admitted that AO has
passed the orders under section 154 of Act beyond the period of limitation
prescribed under section 154(7) of the Act. He thus merely relied upon the
orders passed by the AO.
10. On the other hand, the learned counsel for the assessee submitted
that the orders passed by the AO under section 154 of the Act deserve to be
quashed and even on merits the AO has not made out a case and thus
strongly supported the order of the learned CIT(A).
11. We have heard the rival submissions and carefully perused the record.
Against the reasons given by the learned CIT(A) for quashing the orders
passed under section 154 of the Act, both on technical grounds and also on
merits, no material, whatsoever, was placed before us by the Revenue to
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show that the orders passed by the CIT(A) are contrary to law. Having regard
to the circumstances of the case we do not find any justification to interfere
with the orders passed by the learned CIT(A) and accordingly we uphold the
orders passed by the learned CIT(A) and dismiss the appeals filed by the
Order pronounced in the open court on 21st May, 2015.
(Sanjay Arora) (D. Manmohan)
Accountant Member Vice President
Mumbai, Dated: 21st May, 2015
1. The Appellant
2. The Respondent
3. The CIT(A) 25, Mumbai
4. The CIT 14, Mumbai City
5. The DR, "D" Bench, ITAT, Mumbai
ITAT, Mumbai Benches, Mumbai