2016 (1) TMI 1404 - AT - Income Tax

Revision u/s 263 - Ex-parte order - Depreciation on vehicles whether to be allowed @ 30% or 15% - HELD THAT - As find from the sample invoices submitted before us in the paper book that assessee raises separate charges for transportation of goods from CFS to Kolkata Port Trust and vice versa on per container basis. Hence it is proved that the transportation hire charges income is duly offered by the assessee in the sum of ₹ 53.60 lacs which is included in the total receipts of ₹ 349.28 lacs under the head Income from services . This goes to prove that the vehicles of the assessee were used for transporting goods of the persons using assessee s CFS facility. Hence it can be safely concluded that the vehicles were used by the assessee in the business of running them on hire thereby becoming eligible for depreciation @ 30% as against 15% stated by CIT in his section 263 order. AO had rightly appreciated the factual position of the assessee and had granted depreciation @ 30%. AO even in subsequent assessment year 2011-12 u/s 143(3) proceedings dated 27.2.2015 had allowed the depreciation on these vehicles @ 30%. Hence we hold that the order passed by the AO cannot be termed as erroneous. Bogus purchases - based on report of DGIT (Inv.), Mumbai - No material provided to assesse - No material was part of record also - HELD THAT - We find no details / evidence whatsoever has been mentioned in the impugned show cause elaborating on the so called information . We find that no specific information is discernible from the impugned notice. We also find that the assessee has not been provided with any specific evidence which would in any manner suggest that the purchases made by the assessee were bogus. Whether any statement on oath has been recorded from M/s DCL is not on record before us and even if it be, the same has not been provided to the assessee for his records and rebuttal. Hence we find that the show cause notice issued by the Learned CIT on this issue is only a mere allegation that has been raised against the assessee without any material evidence on record. The information alleged to have been obtained from DGIT (Inv.), Mumbai by the Learned CIT ought to have been shared with the assessee for his rebuttal in line with the principles of natural justice. Expecting an assessee to reply in a quasi judicial proceeding without knowing for what purpose he has been asked to do so, is not in accordance with law. In the instant case before us, the assessee is definitely in a much better position than that of the assessee s mentioned in the aforesaid judgements. As in the case before us, the assessee had even furnished the details of VAT payments and filing of VAT returns by the supplier before the Department of Sales Tax. The facts in the aforesaid case are squarely applicable to the facts of the case before us and hence we hold that the assessee had duly discharged its complete onus to prove the genuinity of purchases made from DCL and there is no scope for drawing any adverse inference with regard to the same in the facts of the case. We also find that the Learned CIT having issued show cause notice u/s 263 of the Act to examine two specific issues of allowance of depreciation on vehicles and bogus purchases, ought not to have set aside the entire assessment to be done denovo as it would only result in giving another innings to the Learned AO to have a review on the concluded issues. grounds raised by the assessee are allowed.

Issues Involved:
1. Legality of the CIT's order under Section 263 for the Assessment Year 2009-10.
2. Depreciation on vehicles at the rate of 30%.
3. Alleged bogus purchases from M/s Duralloy Cutters Ltd.
4. Setting aside the entire assessment for a de novo review.

Issue-wise Detailed Analysis:

1. Legality of the CIT's order under Section 263 for the Assessment Year 2009-10:
The assessee challenged the CIT's order under Section 263, arguing that the original assessment order was neither erroneous nor prejudicial to the interests of the Revenue. The CIT had issued a show cause notice under Section 263, treating the original assessment order as erroneous and prejudicial to the interests of the Revenue due to two main reasons: the depreciation rate applied to vehicles and alleged bogus purchases from M/s Duralloy Cutters Ltd.

2. Depreciation on vehicles at the rate of 30%:
The CIT contended that the assessee was not entitled to claim depreciation at 30% on vehicles as they were not used for running on hire. The assessee argued that the vehicles were used in the business of running them on hire, evidenced by transportation hire charges included in their income. The Tribunal found that the vehicles were indeed used for transporting goods between Kolkata Port and the assessee's Container Freight Station (CFS), and transportation charges were separately invoiced. This substantiated the claim for depreciation at 30%. The Tribunal noted that the AO had allowed the depreciation at 30% in subsequent assessments as well, thus the original assessment order was not erroneous.

3. Alleged bogus purchases from M/s Duralloy Cutters Ltd:
The CIT alleged that the assessee made bogus purchases based on information from DGIT (Inv.), Mumbai. The assessee provided complete details of purchases, including invoices, payment proofs, and transportation vouchers. The Tribunal noted that the CIT did not furnish specific details or evidence from the DGIT's information to the assessee, nor did it provide an opportunity for rebuttal. The Tribunal emphasized that the assessee had demonstrated the genuineness of the purchases and corresponding sales, thereby discharging its onus. The Tribunal cited precedents where similar allegations were dismissed due to lack of specific evidence and non-compliance with principles of natural justice.

4. Setting aside the entire assessment for a de novo review:
The Tribunal held that the CIT should not have set aside the entire assessment for a de novo review based on two specific issues. This would give the AO another opportunity to review concluded issues, which is not permissible. The Tribunal allowed the specific ground raised by the assessee against setting aside the entire assessment.

Conclusion:
The Tribunal quashed the CIT's order under Section 263, holding that the original assessment order was not erroneous or prejudicial to the interests of the Revenue. The appeal of the assessee was allowed, and the order of the AO under Section 143(3) was restored.

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