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2021 (4) TMI 672 - AT - Income TaxRevision u/s 263 - different block of assets for the plant and machinery is viz-a-viz. motor cars as per appendix-I under the heading III of the depreciation schedule - Pr. CIT was of the view that the motor cars purchased by the assessee cannot form part of the block of assets under the category of plant and machinery. But the assessee in the revised computation of income has shown both the assets under the same category which was also accepted by the AO - HELD THAT - Admittedly there are 2 different block of assets as specified in the depreciation schedule but both the assets carry the same rate of depreciation i.e. 15%. There is no ambiguity to the fact that motor cars and the plant machinery being eligible for depreciation at the same rate has to be classified under same block of assets despite there were different entries in the depreciation schedule. It was also pointed out that the assessee is not carrying on any business activity. Indeed the manufacturing activity of the assessee was closed down but the assessee changed its object clause which can be verified from the memorandum of association. As such the assessee got inserted new objects in the main object clause of memorandum of association by passing special resolution dated 13th November 2013. We also note that the assessee has declared interest income as business income which was also accepted by the revenue. This interest income of ₹ 85,30,962/- was declared in the year under consideration. It seems that the assessee was carrying on the business activities and therefore the depreciation claimed by the assessee on the cars cannot be disallowed on the ground that there was no business activity carried out by the assessee in the year under consideration. AO during the assessment proceedings have carried out necessary verification after applying his mind. Thereafter he has taken a conscious decision by accepting the income declared by the assessee in the revised return of income. Once the AO has taken a view after necessary verification then the learned Pr. CIT cannot substitute the view taken by the AO by his own view on the ground of non-verification. We hold that there is no infirmity in the order of the AO which requires to be revised by the learned Pr. CIT under section 263 of the Act. Accordingly the order of the learned Pr. CIT is based on wrong assumption of facts. Consequently we quash the same. Hence the ground of appeal of the assessee is allowed.
Issues Involved:
1. Validity of the order passed by the Pr. CIT under section 263 of the Income Tax Act. 2. Whether the Pr. CIT erred in setting aside the assessment order and directing a fresh assessment. 3. Classification of assets under the same block for depreciation purposes. 4. Whether the assessee was carrying on business activities during the relevant assessment year. Issue-wise Detailed Analysis: 1. Validity of the Order Passed by the Pr. CIT Under Section 263: The assessee challenged the order passed by the Pr. CIT under section 263 of the Income Tax Act, claiming it to be "bad in law and ab initio void." The Tribunal examined whether the Pr. CIT had valid grounds to invoke section 263, which allows revision of an order if it is "erroneous insofar as it is prejudicial to the interest of the revenue." The Tribunal found that the AO had conducted necessary verifications and taken a plausible view, thus the order by the Pr. CIT was based on a wrong assumption of facts. 2. Setting Aside the Assessment Order and Directing a Fresh Assessment: The Pr. CIT set aside the assessment order dated 02-11-2016, directing the AO to make a fresh assessment. The Tribunal noted that the AO had raised specific queries during the assessment proceedings and the assessee had provided satisfactory responses. The AO had accepted the revised return after due verification, indicating that the assessment order was neither erroneous nor prejudicial to the revenue's interest. Therefore, the Tribunal quashed the Pr. CIT's order. 3. Classification of Assets Under the Same Block for Depreciation: The Pr. CIT argued that motor cars and plant & machinery do not form the same block of assets despite having the same depreciation rate of 15%. The Tribunal referred to the definition of "block of assets" under section 2(11) of the Act, which groups assets with the same depreciation rate into a single block. Citing precedents from ITAT Delhi and Mumbai benches, and the Delhi High Court, the Tribunal concluded that assets with the same depreciation rate should be classified under the same block, regardless of their individual categories in the depreciation schedule. 4. Business Activities During the Relevant Assessment Year: The Pr. CIT contended that the assessee was not engaged in business activities as its manufacturing operations had ceased. However, the Tribunal found that the assessee had amended its object clause to include financing activities and had declared substantial interest income as business income, which was accepted by the revenue. The Tribunal concluded that the assessee was indeed carrying on business activities, justifying the depreciation claim on motor cars. Conclusion: The Tribunal held that the AO had conducted a proper assessment, taking a plausible view supported by adequate verification. The Pr. CIT's order under section 263 was based on incorrect assumptions and was quashed. The appeal filed by the assessee was allowed, and the original assessment order was upheld.
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