2020 (7) TMI 16 - AT - Income Tax

Rectification u/s 154 - assessee had claimed depreciation at the higher rate of 60%, as applicable to computers, on certain items of plant and machinery -HELD THAT - We are of the view that this issue requires fresh examination at the end of the A.O. for the reason that - a) The assessee was not provided with adequate opportunity to present its case before the A.O. b) The assessee also pleads for one opportunity to furnish breakup details of items included under the heads Plant and Machinery - General and Plant and Machinery - Office . Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and restore the same to the file of the A.O. for examining it afresh. Disallowance u/s 14A - Provisions of Rule 8D were omitted to be applied for computing disallowance u/s 14A - HELD THAT - A.R. submitted that the A.O. has applied provisions of rule 8D(2)(iii) without affording adequate opportunity to the assessee. He submitted that assessee should be in a position to explain its case before the A.O., if an opportunity is given to the assessee.D.R. also agreed to the same. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue also and restore the same to the file of the A.O. for examining it afresh.

Issues:
1. Revenue's appeal against Ld CIT(A)'s decision on additions made by AO under section 154 of the Act.
2. Assessee's cross objection regarding violation of principles of natural justice in AO's rectification order.

Analysis:
1. The appeal by the revenue challenges Ld CIT(A)'s decision on the additions made by AO under section 154 of the Act for the assessment year 2013-14. The AO initiated rectification proceedings under section 154 due to mistakes in the original assessment order, specifically related to depreciation and disallowance under section 14A of the Act. The Ld CIT(A) held that the additions were debatable and deleted them, leading to the revenue's appeal.

2. The cross objection by the assessee pertains to the alleged violation of principles of natural justice in the AO's rectification order. The assessee contended that the AO did not provide sufficient opportunity, but Ld CIT(A) rejected this claim. The Ld CIT(A) also deleted the additions by considering them debatable, leading to the cross objection by the assessee.

3. Regarding the depreciation issue, the Ld A.R. argued that the items claimed for higher depreciation were essentially computers and peripherals, despite being classified differently. The Ld D.R. contended that the assessee did not provide detailed breakup of items under the claimed categories, suggesting a higher rate of depreciation was wrongly applied. The Tribunal found the issue non-debatable but remanded it for fresh examination due to lack of opportunity for the assessee to present detailed breakup.

4. On the disallowance under section 14A, the Ld A.R. argued that investments were only in mutual funds, requiring no additional expenditure, and the disallowance was made to comply with the Act. The AO enhanced the disallowance using rule 8D(2)(iii) without sufficient opportunity for the assessee to explain. The Tribunal set aside the Ld CIT(A)'s decision and remanded the issue for fresh examination by the AO.

5. Both issues were remanded to the AO for re-examination, making the cross objection filed by the assessee irrelevant. The Tribunal emphasized providing proper opportunity for the assessee to be heard. Consequently, the appeal by the revenue and the cross objection by the assessee were allowed for statistical purposes.

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