2013 (6) TMI 833 - AT - Income Tax

Summary

Issues involved: Challenge to the order of the CIT u/s. 263 of the Act for Assessment year 2004-05 regarding depreciation on intangible assets acquired prior to 1.4.1998.

The Appellate Tribunal ITAT MUMBAI, in the case where the assessee challenged the order of the CIT u/s. 263 of the Act, held that the CIT rightly invoked jurisdiction u/s. 263 as the AO did not question the claim of depreciation on property time sharing unit, which was considered erroneous and prejudicial to the interest of the Revenue. The Tribunal modified the CIT's direction, instructing the AO to verify if the property time sharing unit falls under the category of intangible assets, providing a reasonable opportunity for the assessee to be heard. The appeal filed by the assessee was dismissed.

During the assessment proceedings, the AO issued relevant questions regarding the depreciation claimed on land and lease assets. The assessee's responses indicated that depreciation was not claimed on land and that the company was entitled to depreciation on leased assets as per Section 32 of the I.T. Act, 1961, supported by a decision of the Apex Court. The Tribunal noted that the AO did not question the claim of depreciation on the property time sharing unit, leading to the conclusion that the CIT rightly invoked jurisdiction u/s. 263.

The CIT, in invoking jurisdiction u/s. 263, found that the Assessing Officer did not apply his mind regarding the allowance of depreciation on intangible assets acquired prior to 1.4.1998, resulting in excessive depreciation being allowed. The fixed assets schedule showed depreciation claimed on intangible assets, leading to the decision that the AO's order was erroneous and prejudicial to the Revenue's interest.

The Tribunal upheld the CIT's decision to invoke jurisdiction u/s. 263, emphasizing that the AO's failure to question the depreciation claim on the property time sharing unit was a valid reason for the CIT's action. The Tribunal modified the CIT's direction, instructing the AO to verify the categorization of the property time sharing unit as an intangible asset after providing a hearing opportunity to the assessee.

In conclusion, the Appellate Tribunal ITAT MUMBAI affirmed the correctness of the CIT's order u/s. 263, highlighting the importance of verifying the classification of the property time sharing unit as an intangible asset, and dismissed the appeal filed by the assessee.