VOLTAS LTD Vs. CIT

JUDGEMENT

(1.) The assessee seeks to challenge the validity of a notice issued on 30 March 2011 seeking to reopen an assessment for Assessment Year 2004 05. The reopening of the assessment is beyond a period of four years.

(2.) The reasons which have been communicated to the assessee for reopening the assessment are as follows :

(3.) The assessee submitted its objections to the reasons communicated by the Assessing Officer. The objections have been disposed of by an order dated 15 November 2011. From the order passed by the Assessing Officer on the objections raised by the assessee, the basis for reopening the assessment is confined to two issues. The first issue is that the assessee set off unabsorbed depreciation for Assessment Year 1994 95 amounting to Rs.25.81 Crores in Assessment Year 2005 06. In a judgment of its Special bench in DCIT v. Times Guaranty Ltd. (ITA NO.4917 & 4918/Mumbai/2008 delivered on 30 June 2010) the Tribunal held that unabsorbed depreciation for the period upto 1996 97 could be carried forward and set off against the income from any head for a maximum period of eight assessment years. Hence, according to the Assessing Officer the set off of unabsorbed depreciation for Assessment Year 1994 95 against the income of Assessment Year 2005 06 was not in accordance with law and consequently income has escaped assessment. The second issue in relation to which the assessment is reopened is that while giving effect to the order of the Tribunal, income was computed under Section 115JB without any addition on account of provision for diminution in the value of investment and provision for doubtful debts / advances. In this regard reliance has been placed on a subsequent amendment made by the Finance Act of 2009 with retrospective effect from 1 April 2001. According to the Assessing Officer since the amendment to Section 115JB has been brought about with retrospective effect from 1 April 2001, the Assessing Officer was ipso facto entitled to issue a notice under Section 148 since the relevant income by way of diminution in the value of assets / investments which was required to be added back has not been brought to tax.