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2007 (4) TMI 402 - AT - Income TaxIncome escaping assessment - Application u/s 154 - Rectification of mistakes - Validity Of Assessment u/s 147 - Assessee s case is in respect of depreciation on current investment - As per RBI Guidelines, the current investments have to be valued at cost or market price whichever is lower and fall in value is termed as depreciation i.e., loss on revaluation - HELD THAT - It is seen that the CIT (Appeals) himself has stated that it is a review order. Moreover, in the concluding paragraph, the CIT (Appeals) has held that To conclude the appellant s appeal on the point of depreciation on current investment for assessment year 2000-01 is allowed through this revision order . Section 154 is concerned, it does not give power of review to any tax authority. It is clear from the decision, in the case of T.S. Balaram, ITO v. Volkart Bros. 1971 (8) TMI 3 - SUPREME COURT that what can be rectified u/s 154 is the error which is apparent on the face of the record and mistake apparent from the record. If the issue is debatable, then the tax authority has no jurisdiction to grant relief u/s 154. Admittedly, both the decisions i.e., United Commercial Bank s case 1999 (9) TMI 4 - SUPREME COURT and Nedungadi Bank Ltd. s case 2002 (11) TMI 29 - KERALA HIGH COURT are relating to the banking companies and not relating to the non-banking financial companies. The first question will be whether the ratio of the said decisions is applicable to the non-banking financial company. In our opinion, this is a debatable issue. Moreover, on the perusal of the order of the CIT (Appeals), we find that the CIT (Appeals) has reviewed his own order u/s 154 and that is not permissible. We, therefore, cancel and set aside the order of the CIT (Appeals) and allow the revenue s appeal. Validity Of Assessment u/s 147 - HELD THAT - Nothing has been brought on record by the Assessing Officer that he had some other information and the Assessing Officer has proceeded to complete the assessment on the basis of notice issued u/s 148 only from the return of income filed by the assessee. The ld. CA further submitted that the CIT (Appeals) has rightly cancelled the assessment framed by the Assessing Officer u/s 143(3) read with section 147. In the present case also, the time-limit for making general enquiry u/s 143(2) has express as Assessing Officer has to serve the notice on the assessee within a period of 12 months from the end of the month in which the return is furnished. Hence, the Assessing Officer should have served the notice on the assessee on or before 31-10-2002. In our opinion, the principles laid down in the case of Travancore Cements Ltd. 2006 (9) TMI 174 - KERALA HIGH COURT are squarely applicable to the facts of the present case as what the Assessing Officer has done u/s 147 is the regular assessment which he could have done u/s 143(3). In our opinion, no interference is called for in the order of the CIT (Appeals) on this issue. The revenue has also taken grounds on merits. As we have held that the proceedings initiated u/s 147 by the Assessing Officer are without jurisdiction, we do not consider it necessary to deal with the grounds raised by the revenue on merits. In the result, the revenue s appeals are dismissed.
Issues Involved:
1. Depreciation on vehicles leased or hired out. 2. Disallowance under Section 14A of the Income Tax Act. 3. Validity of reassessment proceedings under Section 147. 4. Rectification of CIT (Appeals) order under Section 154. Issue-wise Detailed Analysis: 1. Depreciation on Vehicles Leased or Hired Out: The first issue considered was whether the CIT (Appeals) erred in allowing depreciation at the rate of 40% on vehicles leased or hired out by the assessee-company. The Tribunal noted that this issue had been previously decided in favor of the assessee in its own case for the assessment years 1997-98 and 1998-99. The Tribunal referenced a Madras High Court decision in CIT v. Annamalai Finance Ltd., which held that leasing out vehicles is a mode of business, and thus, the assessee is entitled to a higher depreciation rate of 40%. The Tribunal followed this precedent and ruled in favor of the assessee. 2. Disallowance under Section 14A: The next issue was the disallowance made by the Assessing Officer under Section 14A, which was deleted by the CIT (Appeals). This issue arose for the assessment years 1999-2000, 2000-01, and 2001-02. - Assessment Year 1999-2000: The assessee received interest from tax-free bonds and claimed the entire amount as exempt. The Assessing Officer disallowed 5% of the interest income as proportionate expenditure. The CIT (Appeals) found the reassessment proceedings under Section 147 to be without jurisdiction, relying on precedents from the Punjab and Haryana High Court. The Tribunal upheld this decision as the revenue did not challenge the jurisdictional finding. - Assessment Year 2000-01: The assessee received dividend income and claimed it as exempt. The Assessing Officer disallowed 5% of the dividend income as proportionate expenditure. The CIT (Appeals) erroneously relied on decisions related to Section 147 proceedings. The Tribunal remanded the issue back to the CIT (Appeals) for reconsideration with a proper speaking order. 3. Validity of Reassessment Proceedings under Section 147: For the assessment year 2001-02, the validity of reassessment proceedings was challenged. The CIT (Appeals) quashed the reassessment proceedings, stating that the Assessing Officer issued the notice under Section 148 mechanically without fulfilling the requirements of Section 147. The Tribunal upheld this decision, referencing the Kerala High Court's ruling in Travancore Cements Ltd. v. Asstt. CIT, which held that general enquiries cannot be made under Section 147 after the period for issuing notice under Section 143(2) has expired. 4. Rectification of CIT (Appeals) Order under Section 154: The issue was whether the CIT (Appeals) was justified in rectifying his order for the assessment year 2000-01 under Section 154. The CIT (Appeals) had allowed the assessee's application for rectification, citing decisions from the Supreme Court and Kerala High Court, as well as a CBDT Circular. The Tribunal found that Section 154 does not grant the power of review and that the CIT (Appeals) had exceeded his jurisdiction by effectively reviewing his own order. The Tribunal set aside the CIT (Appeals) order, stating that the issue was debatable and not a mistake apparent from the record. Conclusion: - The Tribunal dismissed the revenue's appeals regarding depreciation on leased vehicles and the disallowance under Section 14A for the assessment year 1999-2000. - The issue of disallowance under Section 14A for the assessment year 2000-01 was remanded for reconsideration. - The Tribunal upheld the CIT (Appeals) decision quashing the reassessment proceedings for the assessment year 2001-02. - The Tribunal set aside the CIT (Appeals) order under Section 154, allowing the revenue's appeal on this issue.
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