2009 (8) TMI 9 - HC - Income Tax

Rectification of mistake - ITAT held that depreciation allowed earlier cannot be withdrawn by revoking the provisions of Section 154 held that - Only argument raised is that the asset itself did not exist and thus, the claim of the assessee was bogus. This submission cannot be accepted. There is nothing to substantiate this argument. Regular assessment had been done under Section 143(3) of the Act and depreciation was held to be admissible. It has been held that the assessee purchased the asset and leased out the same in the course of its business. Rectification was permissible only if there was error apparent on the face of the record and not something which could be established by long drawn process of reasoning revenue appeal dismissed.

Summary

Issues:
1. Whether depreciation allowed earlier can be withdrawn by revoking the provisions of Section 154 of the Income Tax Act, 1961.
2. Whether rectification under Section 154 of the Act is permissible when the asset in question never existed in possession of the assessee.

Analysis:
1. The appeal was filed by the Revenue against the order of the Income Tax Appellate Tribunal regarding the disallowance of depreciation claimed by the assessee for the assessment year 1993-94. The Tribunal upheld the claim of the assessee for depreciation, stating that the business involved hiring out machinery, making depreciation permissible as per legal precedents.

2. The Revenue contended that the asset for which depreciation was claimed did not exist, making the claim bogus. However, the Court noted that regular assessment had been conducted under Section 143(3) of the Act, where depreciation was deemed admissible. The Court emphasized that rectification under Section 154 could only be based on an error apparent on the face of the record, not on a matter requiring detailed reasoning.

3. The Revenue relied on a Delhi High Court judgment to support its argument. The Court distinguished this case, highlighting that in the cited judgment, there was a conflict in findings regarding depreciation, which justified rectification under Section 154. In the current case, no such conflict existed, leading the Court to dismiss the appeal.

4. The Court concluded that no substantial question of law arose from the case. The appeal was subsequently dismissed, upholding the Tribunal's decision to allow depreciation claimed by the assessee.