2018 (9) TMI 716 - HC - Income Tax

Revision u/s 263 - Whether depreciation at the enhanced rate of 30% for a vehicle can be claimed by an assessee who does not run a business of hiring out the vehicle for consideration? - Held that - A distinction ought to be made between the two parts to Section 263 - the first part which permits the Commissioner to enhance or modify the assessment and the second part which permits the Commissioner to cancel the assessment and direct a fresh assessment. There is an element of finality which is involved when the Commissioner exercises authority under the first part as indicated above. There is also an element of finality when the commissioner cancels the assessment, but there is no real prejudice to the assessee other than the assessee suffering the process once again in a fresh assessment being required to be undertaken. Since in this case the Appellate Tribunal looked into the documents that were furnished by the assessee in response to the show-cause notice issued under Section 263 and found, on facts, that the perceived bogus transactions were genuine, the order impugned does not call for any interference on such ground. The other ground pertains to the rate of depreciation that the assessee had claimed and the permissibility thereof. Appellate Tribunal took into consideration the fact that depreciation at the enhanced rate had been permitted in at least one subsequent assessment year. Further, it was the case of the assessee that the assessee may not have let out its vehicles to third parties, but the assessee used the vehicles for transporting the goods pertaining to the business of the assessee and such activity permitted the claim of enhanced depreciation. Decided against the revenue.

Summary

Issues:
1. Whether an Appellate Tribunal should interfere with an order passed under Section 263 of the Income Tax Act for a fresh assessment?
2. Can an assessee claim depreciation at an enhanced rate for a vehicle without renting it out?

Analysis:
1. The judgment deals with an appeal concerning two key issues. The first issue revolves around the Appellate Tribunal's authority to intervene in an order issued under Section 263 of the Income Tax Act for a fresh assessment. In this case, the Commissioner directed a fresh assessment based on alleged fraudulent transactions between the assessee and another party. The Appellate Tribunal examined the documents provided by the assessee and determined that the transactions were genuine, thus concluding that the Commissioner's order did not warrant interference. The Tribunal differentiated between the Commissioner's power to modify an assessment and the power to order a fresh assessment, emphasizing finality in the former but allowing for re-assessment in the latter scenario.

2. The second issue pertains to the claim of enhanced depreciation for a vehicle by the assessee. Despite not renting out the vehicle for consideration, the assessee argued that using the vehicle for business activities justified the enhanced depreciation claim. The Appellate Tribunal considered the assessee's argument, noting that similar depreciation had been allowed in a previous assessment year. After assessing the facts, the Tribunal found merit in the justification provided by the assessee, leading to the dismissal of the appeal against the enhanced depreciation claim.

In conclusion, the High Court of Calcutta upheld the decision of the Appellate Tribunal, dismissing the appeals related to both issues. The judgment highlights the importance of factual analysis in tax matters and the discretion of the Tribunal in reviewing orders under the Income Tax Act.