Full Judgment
The assessee filed its return of income after claiming of set off of unabsorbed brought forward depreciation. The total income returned by the assessee was nil The unabsorbed depreciation claimed by the assessee for the assessment year 1995-96 was Rs. 21,47,206. This amount has been set off by the assessee against the income of the impugned assessment year 1996-97. The return filed by the assessee-company was processed under section 143(1)(a).
Later on the assessing officer found that the correct amount of unabsorbed depreciation attributable to the assessment year 1995-96 was Rs. 15,06,390. In order to rectify the above mistake, the assessing officer issued a notice proposing to rectify the assessment order under section 154. The assessee-company did not object to the correct amount pointed out by the assessing officer. But the assessee-company made a further claim of deductions under sections 80-IA and 80HHD. The assessing officer did not accept these two later claims made by the assessee on the ground that the claims were not made in the return of income nor made in the course of the assessment proceedings. The assessing officer pointed out that the deductions could be claimed only if supported with prescribed documents and certificates along with the return of income. The claims were disallowed. The assessing officer rectified the assessment adopting the correct amount of unabsorbed depreciation and finally determined a revised total income of Rs. 6,40,820.
The rectification order was taken in appeal. The contentions raised before the CIT(A) were that the assessing officer has erred in not granting deduction available under sections 80-IA and 80HHD,while rectifying the assessment order for the purpose of adopting the correct amount of unabsorbed depreciation pertaining to the assessment year 1995-96. The CIT(A) also dismissed the claim of the assessee with the following observation: "...... The claim of the appellant in rectification proceedings for the first time which had neither been made in the return of income nor during the course of assessment proceedings has rightly been rejected by the assessing officer. No interference is called for in the order passed by the assessing officer. The appeal thus been dismissed." It is in the above context that the present appeal has been filed before the Tribunal. We heard both sides in detail. There is no dispute regarding the amount of unabsorbed depreciation considered by the assessing officer in the course of rectification proceedings. The only issue raised in this appeal is whether the assessee is entitled to claim the deductions available under sections 80-IA and 80HHD, for the first time, before the assessing officer in the course of rectification proceedings under section 154.
When the assessee filed its return of income, it had adopted Rs. 21,47,206 as the unabsorbed depreciation pertaining to the assessment year 1995-96. When the said amount was adopted by the assessee-company, no profit was left over so that the assessee-company had no occasion to claim the deductions available under sections 80-IA and 80HHD of the Income Tax Act, 1961. The deductions in the above provisions could be claimed by the assessee-company only if it had a positive total income.
As the assessee had no such income, no claim could have been made under the provisions of above sections.
The correct amount of unabsorbed depreciation pertaining to the assessment year 1995-1996 was later determined at Rs. 15,06,390. This amount was adopted by the assessing officer in his rectification proceedings. The adoption of the correct figure of unabsorbed depreciation contributed to the profit of the assessee-company as a result of which the nil income returned by the assessee got converted into a positive income of Rs. 6,40,820. A positive profit has been determined in the hands of the assessee-company for the first time in the course of rectification proceedings. Therefore, it is to be seen that the assessee-company had no occasion to claim the deductions even before the assessing officer. The first occasion arose before the assessee-company to make claims for deductions under those sections was the rectification proceedings under section 154. The assessee-company utilized the first opportunity and made the claims before the assessing officer. Therefore, it is to be seen that the assessee-company had no occasion to claim such deductions along with the return of income and at the same time made the relevant claims at the first available opportunity itself. The assessee-company could have claimed the deductions only in the course of rectification proceedings. The assessee-company has filed the Audit Report as required by the statute and has furnished all the relevant details before the assessing officer in the course of rectification proceedings.
Therefore, we find that it is the right of the assessee-company to put.
forward the claims pertaining to sections 80-IA and SOHHD at the time of rectification proceedings. The assessing officer is not justified in negativating the claim of the assessee-company on the ground that the claim was not made along with the return of income. It is to be seen that the assessee had no such occasion to claim the deductions under sections 80-IA and 80HHD.One cannot expect the assessee to perform impossible things. The assessee was prevented from claiming the deductions under, sections 80-IA and 80HHD by a supervening impossibility in the form of nil income in the original computation of taxable income. Whenever the loss, nil income returned by the assessee is converted into positive income, the assessee assumes the right to make claims regarding the deductions available to it only against positive income.
Therefore, we are of the considered view that the lower authorities have erred in ignoring the claims made by the assessee-company. It is to be further seen that the assessee-company has furnished all the particulars along with the necessary audit certificate before the assessing officer at the time of rectification proceedings itself. It is further to be seen that the assessee-company has claimed deductions under sections 80-IA and 80HHD for the subsequent assessment years and the same have been allowed by the assessing officer.
A similar issue was considered by the ITAT Mumbai Bench A in the case of Assistant Commissioner v. R. R. Hosiery (P.) Ltd. (1999) 68 ITD 25 (Mum-Trib). In the said case, the assessee company, an exporter, filed return declaring nil income. In respect of claim under section 80MC, the assessee wrote a note that since there was nil income as per computation of income, section 80HHC working was not required and the same would be submitted at the time of hearing, if needed. The assessment resulted in positive income and the assessee made claim for under section 80HHC deduction, through a petition filed under section 154. The claim was not allowed by the assessing officer. In first appeal, the CIT(A) held that the assessee was entitled to make the claim and the assessing officer was directed to rectify the assessment order and allow the claim made by the assessee. The matter was taken in appeal before the Tribunal. The Tribunal held that the assessee could not have furnished the return in Form No. 10CCAC, it had no occasion to claim the deduction under section 80HHC. The assessee was not anticipating any addition thereby the assessee was not anticipating the conversion of nil income into a positive income. The absence of such an opportunity in the hands of the assessee therefore appeared to be a mistake apparent from the record and the Tribunal held that the order of the CIT(A) was to be upheld.We find that the present case also arise out of the same circumstances, mainly relating to absence of opportunity in the hands of the assessee-company to claim the appropriate relief. The absence of such an opportunity is in the nature of mistake apparent on record.
Therefore, we direct the assessing officer to rectify the assessment order and allow deductions claimed by the assessee after verifying the necessary particulars of the claim.
In result this appeal filed by the assessee is allowed. Order accordingly.