[Income Tax] Assessing Authority Can't Reassess Prior Years Without Inquiry While Determining Relevant Year's Assessment: Kerala High Court

The Kerala High Court stated that while determining the assessment of relevant years assessing authority cannot determine the assessment for earlier years without enquiry. The Division Bench of Justices A.K. Jayasankaran Nambiar and Syam Kumar V.M. observed that “…….we fail to understand 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……..” 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. 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 Kerala High Court. The bench 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 bench observed that the assessee submitted that during the said years returns were filed that were acknowledged by the department but no formal orders of assessment were passed. The bench further stated that “we fail to understand 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 appellant during the assessment years from 1999-2000 to 2009-10.” 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, added the bench. In view of the above, the bench allowed the appeal. Counsel for Appellant/ Assessee: Abraham Joseph Markos Counsel for Respondent/ Department: Jose Joseph Case Title: Kings Infra Ventures Ltd. v. The Assistant Commissioner of Income Tax Case Number: ITA NO. 28 OF 2023Citation: 2024 LiveLaw (Ker) 725Click Here To Read/Download The Order

[Income Tax] Assessing Authority Can't Reassess Prior Years Without Inquiry While Determining Relevant Year's Assessment: Kerala High Court

Mehak Dhiman

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