2017 (8) TMI 1132 - AT - Income Tax

Revision u/s 263 - claim of additional depreciation - lack of inquiry by AO - Held that - We find that the addition to the fixed assets in this case was made in the second half of the preceding previous year relevant to assessment year 2011-12 and the depreciation was claimed at 50% of the normal rate of depreciation as the assets was put to use for less than 182 days. The second aspect is that the assessee claimed depreciation at the rate of 50% of the normal depreciation and carried forward the remaining 50% to the subsequent year 2012-13 and claimed the same in that year which is current year assessment year 2012-13 under the clause (iia) of the section 32 of the Act. We also find that even during the course of assessment proceedings, the assessee specifically submitted all the details and schedule of depreciation along with the bills and vouchers in support of the said claim before the AO and the AO thereafter framed the assessment u/s 143(3) of the Act. AO has necessary details qua the additional claim of depreciation of ₹ 1,82,948/- and allowed the claim of the assessee as per the provisions of section 32(1)(iia) of the Act. Accordingly, we are fully agreed with the arguments of ld.AR that it cannot be presumed that due to lack of inquiry the prejudicel is caused to the revenue when the issue was not discussed in the order of AO. Claim of the assessee, which is as per law under the provisions of section 32(1)(iia) of the Act, cannot be said to be have caused prejudice to the revenue and therefore, the order is not erroneous as no prejudice was caused to the revenue as the assessee has claimed the additional depreciation as per the provisions of Act which is also supported by number of decisions. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdiction exercised under section 263 of the Income Tax Act by the CIT.

Analysis:
The appeal was filed against the order of the CIT under section 263 of the Income Tax Act, 1961, for the assessment year 2009-10. The key issue raised was the jurisdiction exercised by the CIT in setting aside the assessment order of the Assessing Officer (AO) to make a denovo assessment. The assessment was initially completed by the AO under sections 144 and 144C of the Act, determining the total income. The CIT invoked section 263 Explanation 2, stating that the AO failed to disallow depreciation claimed by the assessee, rendering the assessment erroneous and prejudicial to the revenue's interest. The notice issued to the assessee highlighted the discrepancy in the claim of additional depreciation under section 32(1)(iia) for assets added in the second half of the financial year 2010-11 relevant to AY 2011-12.

The assessee responded, justifying the claim of additional depreciation under section 32(1)(iia) and arguing that the claim was made in accordance with the law and supported by judicial pronouncements. The PCIT, after considering the contentions, held that the order was erroneous and prejudicial to the revenue due to the claimed depreciation amount. The PCIT emphasized the need for proper inquiry and verification by the AO, which was deemed lacking in this case.

During the appellate proceedings, the AR vehemently defended the assessee's claim, asserting that the depreciation was rightfully claimed and supported by relevant documentation submitted to the AO. The AR contended that the AO had conducted necessary inquiries and the claim was made in accordance with the law. The AR cited precedents and case law to support the claim, emphasizing that no prejudice was caused to the revenue.

The Tribunal, after considering the submissions, found that the AO had the requisite details regarding the additional depreciation claim and allowed it as per the provisions of section 32(1)(iia) of the Act. The Tribunal agreed with the AR's arguments that lack of discussion in the AO's order did not imply lack of inquiry, and the claim made by the assessee was in compliance with the law. Relying on judicial decisions and the specific circumstances of the case, the Tribunal set aside the PCIT's order under section 263, concluding that the proceedings were without jurisdiction.

In conclusion, the Tribunal dismissed the appeal of the assessee, emphasizing that the claim of additional depreciation was made in accordance with the law, supported by necessary documentation, and did not cause prejudice to the revenue. The Tribunal's decision was based on the principles of proper inquiry by the AO and compliance with legal provisions regarding depreciation claims.