2017 (3) TMI 665 - AT - Income Tax

Revision u/s 263 - incorrect claim of depreciation on trucks purchased, expenditure towards insurance claims wrongly claimed and depreciation on capital expenditure wrongly allowed without any enquiry and without examining the issues involved in perspective - Held that - No material has been brought to our notice by the assessee which goes to prove that the AO had examined the issues raised by the Pr.CIT and allowed these claims after proper factual appreciation thereof. We observe that the assessee could not bring anything on record to prove that an enquiry on the issue was conducted by the AO while completing the impugned assessment. It follows that the claims in question have been accepted without any enquiry thereon. We agree with the observation of the Pr.Commissioner that depreciation allowance under s.32 on the invoices for purchase of the vehicle on the last day calls for minimum satisfaction that the assess were put to use on that day itself. The completion of formalities at a subsequent date gives rise to reasonable and plausible inference in support of the opinion of Pr.CIT which is required to be rebutted by the assessee. Similarly, the insurance claim for the whole year has been claimed even if it is presumed for a moment that the vehicles insured wherein put to use on the last day. Clearly, a presumption would arise that expenses though paid were not incurred during the relevant FY. Similarly, we find merit in the case of the Pr.CIT that depreciation on repair expenses of capital nature have been allowed without making relevant enquiries at all as warranted. Under these circumstances, we are inclined to accept the case made out by the Pr.CIT that the assessment order has been passed without making enquiry necessitated in the circumstances of the case. - Decided against assessee.

Summary

Issues Involved:
Jurisdiction under section 263 of the Income Tax Act regarding assessment order passed for Assessment Year 2011-12.

Detailed Analysis:

1. Background and Assessment Order:
The appellant, a company engaged in transportation and civil construction, filed its income tax return for AY 2011-12 declaring total income at ?13,11,390, which was assessed at ?13,46,390 under section 143(3) of the Income Tax Act. The Principal Commissioner of Income Tax (Pr.CIT) issued a show-cause notice under section 263, questioning the depreciation claim of ?2,78,570 on two Taurus Trucks purchased on the last day of the financial year, along with other expenditure claims. The Pr.CIT alleged that the assessment order was erroneous and prejudicial to the revenue's interests due to lack of proper enquiry.

2. Appellant's Contentions:
The appellant challenged the Pr.CIT's jurisdiction under section 263, arguing that the assessment order was not erroneous. They defended the depreciation claim on the trucks, stating they were used for business purposes pending RTO formalities. The insurance expenses were claimed to be for business purposes and debited accordingly. Regarding major repair expenses on tippers, the appellant asserted they were for existing trucks, not the purchased tippers.

3. Respondent's Counter-arguments:
The Respondent supported the Pr.CIT's order, highlighting the lack of enquiry by the Assessing Officer (AO) and absence of documentary evidence to substantiate the appellant's claims. They contended that the Pr.CIT's decision was justified based on the facts presented.

4. Tribunal's Decision:
The Tribunal analyzed the submissions and orders, finding that the AO had not conducted proper enquiries before allowing the claims. The Tribunal agreed with the Pr.CIT that the assessment order was erroneous and prejudicial to revenue interests. They emphasized the need for factual verification before allowing depreciation, insurance claims, and capital expenditure. The Tribunal upheld the Pr.CIT's decision under section 263, directing the matter back to the AO for reassessment based on proper examination of the issues.

5. Conclusion:
The Tribunal dismissed the appellant's appeal, affirming the Pr.CIT's jurisdiction under section 263. They clarified that their decision was limited to the jurisdictional aspect and did not delve into the merits of the case. The appellant was granted the opportunity to present their case on merits before the AO. The Tribunal concluded that remitting the matter back for proper assessment did not cause serious prejudice, considering the untested correctness of the claims.

In summary, the Tribunal upheld the Pr.CIT's decision under section 263, emphasizing the importance of factual verification and proper enquiry in assessing claims to avoid errors prejudicial to revenue interests.