Alstorm Projects India Limited v. The Deputy Commissioner of Income Tax & Ors.

Mr. R. Murlidharan with P.C. Tripathi i/b. A.K. Jasani for petitioner. Mr. Vimal Gupta for respondents. CORAM : DR. D.Y.CHANDRACHUD AND J.P.DEVADHAR, JJ. DATED : 10TH FEBRUARY, 2010 P.C. :-

Rule, by consent made returnable forthwith. Counsel for the respondents waives service. With the consent of counsel, the petition is taken up for final hearing.

On 30th March, 2009 a notice was issued by the Assessing Officer proposing to reassess the income for the assessment year 2002-03 on the ground that there was reason to believe that income had escaped assessment. The reasons which have been recorded by the Assessing Officer in support of the notice for reopening assessment are to the effect that in the return of income for assessment year 2002-03, the assessee had claimed a set off of unabsorbed depreciation of Rs.1.18 crores against long term capital gain and that in view of the specific provisions of section 32(2) of 2 the Income Tax Act, 1961, the unabsorbed depreciation has to be set off only against the business income while computing the income under the head of profits and gains of business and profession. Hence it has been stated that unabsorbed depreciation was not eligible to be set off against long term capital gains of the same year and consequently, there was reason to believe that income from long term capital gains to the extent of Rs.1.18 crores has escaped assessment for assessment year 2002-03.

In the objections which were filed by the assessee on 15th December, 2009, one of the grounds of objection is as follows:- " Further, we had claimed set off of unabsorbed depreciation of the amalgamating companies brought forward u/s. 32(2) amounting to Rs. 334,288,509 against Long Term Capital Gains in the Return of Income and the same had been disclosed by way of a note to Computation of Income. Finance Act, 2001 has substituted sub-section 2 of section 32, w.e.f. 01-04-2002, which provides that the unabsorbed depreciation shall be deemed to be part of the current year's depreciation. In view of the amendment made in the Act, it is applicable from Assessment year 2002-03. Unabsorbed depreciation of earlier years was rightly considered as part of current year's depreciation and accordingly the treatment given thereof of adjusting the same against Long Term Capital Gain is correct in law. Thus, it is respectfully submitted that there is no escapement of income as alleged in the reasons recorded by you for reopening the assessment. "

The order of the Assessing Officer dated 16th December, 2009 disposing of the objections does not deal with the objection noted above. In these circumstances, we are of the view that it would be appropriate and proper that the proceedings should be remitted back to the Assessing Officer to deal with and dispose of the aforesaid objection. In order to facilitate a 3 fresh order on remand, the impugned order dated 16th December,2009 (Exhibit "I" to the petition) is set aside. The Assessing Officer shall pass a fresh order upon remand after dealing with the specific objection which has been noted above.

The petitioner would be entitled to an opportunity of being heard by the Assessing Officer before the objection is decided. In the event the objection is disposed of against the petitioner, the Assessing Officer shall not pass any order of attachment for a period of four weeks from the date of communication of the order to enable the petitioner to have recourse to its remedies in law.

Rule is made absolute in the above terms. There shall be no order as to costs. (J.P.DEVADHAR, J.)

(DR. D.Y.CHANDRACHUD, J.)