2015 (6) TMI 447 - AT - Income Tax

Rectification order passed under section 154 - Excess depreciation allowed on electrical installation at 15%., Excess depreciation allowed on office equipment at 15%,Payment of contributions of P.F./ESI beyond the due date remain to be disallowed and Income arising out of the development agreement with Vansh Builders taxed as capital gains instead of business income - additions made by the A.O. on the said issues by way of rectification under section 154 were deleted by the Ld. CIT(A) - Held that - Even though all these issues were raised by the Ld. CIT in the notice issued under section 263, the same were dropped by him while passing the order under section 263 inasmuch as the order of the A.O. on these issues was not revised by him. These issues therefore were not involved in the appeal filed by the assessee before the Tribunal against the Order passed by the A.O. under section 263 and there was thus no occasion for the Tribunal to give any decision or direction on these issues. The order passed by the A.O. on 06.12.2012 giving effect to the order of the Tribunal thus did not involve these issues as the scope of the said order was limited to give effect to the order of the Tribunal which did not involve these issues at all. It therefore cannot be said, by any stretch of imagination, that there was any mistake in the order of the A.O. dated 06.12.2012 on these issues calling for any rectification under section 154 and this position clearly evident from the relevant orders, copies of which are placed on record before us, has not been disputed even by the D.R. We therefore uphold the impugned order of the CIT(A) holding that there were no mistakes in the order of the A.O. dated 06.12.2012 calling for any rectification under section 154 and upholding the same, we dismiss this appeal filed by the Revenue. - Decided against revenue.

Summary

Issues:
1. Rectification of additions made by Assessing Officer (A.O.) to the total income of the assessee under section 154 of the Income Tax Act, 1961.
2. Disallowance of additional depreciation on plant and machinery, electrical installation, and office equipment.
3. Tax treatment of income arising from a development agreement with Vansh Builders as capital gains or business income.

Analysis:
Issue 1: The appeal was filed by the Revenue against the order of the Ld. CIT(A)-II, Hyderabad, deleting the additions made by the A.O. to the total income of the assessee by way of a rectification order under section 154. The Ld. CIT issued a notice under section 263, directing the A.O. to assess the income from a development agreement with Vansh Builders as business income instead of capital gains. The Tribunal later held that the income should be taxed as capital gains, not business income.

Issue 2: The A.O. rectified a mistake of adding short-term capital gain twice and made additional rectifications related to disallowance of depreciation claimed on plant and machinery, electrical installation, and office equipment. The assessee appealed against these rectifications, arguing that the issues were debatable and beyond the scope of rectification under section 154. The Ld. CIT(A) agreed with the assessee and deleted the additions, stating that the issues were not subject to rectification under section 154.

Issue 3: The A.O. had made additions under section 154, which the Ld. CIT(A) found to be debatable and not suitable for rectification under section 154. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the issues were not addressed in the previous appeal and were not part of the order giving effect to the Tribunal's decision. The Tribunal dismissed the Revenue's appeal, affirming that there were no mistakes in the A.O.'s order requiring rectification under section 154.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decision that the issues raised by the A.O. were debatable and not subject to rectification under section 154. The Tribunal found no mistakes in the A.O.'s order and affirmed the treatment of the income from the development agreement as capital gains.