2018 (9) TMI 1180 - HC - Income Tax

Dis-allowance of depreciation claim on intangible assets - alternative remedy - Held that - No doubt that the petitioner has filed an appeal before the First Appellate Authority and challenged the order of assessment in respect of the such dis-allowance. It is also true that the First Appellate Authority has allowed the appeal in part and directed the Assessing Officer to appraise the evidences and verify two confirmations from the said two companies and thereafter, to allow the depreciation software as claimed, provided, the Assessing Officer is satisfied with the verification of the confirmations. Therefore, it is not as though the First Appellate Authority had given a positive direction to the Assessing Officer to accept the case of the petitioner insofar as with regard to the issue of depreciation on intangible assets as such. On the other hand, the order of remand clearly indicates that allowing of the depreciation software as claimed by the petitioner, is subject to the satisfactory verification of the confirmations by the Assessing Officer.Therefore, this Court is not inclined to interfere with the order impugned in this writ petition only on the reason that the petitioner is to avail an alternative remedy of appeal before the Appellate Authority.

Summary

Issues:
1. Disallowance of depreciation claim on intangible assets.
2. Compliance with directions issued by the First Appellate Authority.
3. Jurisdiction of the High Court under Article 226 of the Constitution of India.

Analysis:
1. The petitioner contested the disallowance of depreciation on intangible assets for the assessment year 2012-2013. The Assessing Officer disallowed the claim, prompting the petitioner to appeal before the Commissioner of Income Tax (Appeals). The First Appellate Authority partially allowed the appeal, directing the Assessing Officer to verify confirmations from specific companies and allow the depreciation claim if satisfied. The subsequent order of the Assessing Officer reiterated the disallowance, leading to the current writ petition challenging the decision.

2. The petitioner argued that the Assessing Officer did not properly consider the materials presented post-remand, failing to adhere to the First Appellate Authority's directions. Conversely, the respondents contended that the Assessing Officer diligently followed the directions, justifying the disallowance based on unsatisfactory verification of confirmations. The High Court noted that the First Appellate Authority's order was conditional, subject to verification, and the Assessing Officer addressed the confirmations in detail in the subsequent order.

3. The High Court declined to interfere in the matter solely on the grounds of the petitioner's failure to exhaust the statutory appellate remedy of appealing to the Appellate Authority. The Court emphasized that the petitioner must pursue the appeal process to challenge the Assessing Officer's findings effectively. Therefore, the Court disposed of the writ petition, granting the petitioner liberty to file an appeal before the Appellate Authority within two weeks, ensuring a consideration of the case on its merits and in accordance with the law. The Court clarified that it refrained from expressing views on the contentions raised, leaving the decision to the Appellate Authority.