In a significant case, the Kerala High Court held that assessing authority has no right to reassess prior years without inquiry while determining the assessment of relevant years under Income Tax Act, 1961.
Kings Infra Ventures Ltd., the assessee/appellant, filed a nil income tax return for the 2011-12 assessment year, claiming a carried-forward loss of ₹1,52,76,459, which included unabsorbed depreciation from prior years (1996-97 to 2009-10). However, the assessing authority disallowed ₹35,85,037 from this claim, assessing it under Section 143(3) of the Income Tax Act.
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The appellant is engaged in the business of aqua farm culture and the sale of its proceeds. Until 2007, the company functioned in the name of M/s.Victory Aqua Farm Limited later changed its name to M/s.Kings Infra Ventures Limited and ventured into construction business also.
The assessee filed an appeal to the First Appellate Authority which allowed part of the claim, permitting set-off of unabsorbed depreciation from 1996-97 and 1997-98 against income in 2010-11, 2011-12, and later years, but disallowed depreciation from 1998-99 to 2009-10 against income post-2012-13. Additionally, the authority directed reopening assessments for 2010-11 and 2012-13 onward.
The assessee filed an appeal before the Appellate Tribunal which confirmed the findings of the First Appellate Authority. The assessee has challenged the order passed by the Appellate Tribunal before the High Court.
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It was noted that the findings of First Appellate Authority virtually tantamount to reopening the assessments for the assessment years 1999-2000 to 2009-10 without even going into the issue as to whether or not the claim for depreciation, as also set-off of unabsorbed depreciation, made by the assessee in its returns filed during the said years were accepted by the department or not.
The Division Bench of Justices A.K. Jayasankaran Nambiar and Syam Kumar V.M. viewed that how the assessing authority, as well as the First Appellate Authority, while considering assessment proceedings for the assessment years 2011-12 could have embarked upon an enquiry with regard to the nature and extent of business that was carried on by the assessee during the assessment years from 1999- 2000 to 2009-10.
While allowing the appeal, the bench observed that without determining the fate of the assessments made on the assessee during the assessment years 1999-2000 to 2009-10, the issue of allowance of a claim for depreciation on a claim for set-off of unabsorbed depreciation of earlier years could not have been gone into, or any directions given in regard thereto, by the First Appellate Authority.
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Abraham Joseph Markos appeared on behalf of the appellant and Jose Joseph appeared on behalf of the respondent.
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