2022 (6) TMI 1272 - AT - Income Tax

Revision u/s 263 - claim of depreciation at higher rate/higher rate for claim of additional depreciation - HELD THAT - The assessee has not provided the details relevant to the assets, which it is claiming as part of plant machinery. The assessee itself accepted that electrical installation are chargeable to depreciation @ 10%, but claimed the same at higher rate of depreciation. Onus is on the assessee to explain and prove the same with detail about such claim. Since no such specific reply was given by the assessee, the enquiry made by the ld. AO remained incomplete and it ought to have been addressed in the assessment order and Ld. AO should not have allowed the assessee s claim without examining the issues. This factual aspect remains unverified. Assessee merely kept referring to the decision that an enquiry was made by the ld. AO and section 263 should not have been invoked. We, however, find no merit in the contention of the ld. Counsel for the assesse with regard to the issue of claim of depreciation on electrical installation because though the inquiry was initiated, but the same was incomplete as the assessee did not reply to it in the way it ought to be. Therefore, in real terms, there was no enquiry on the said issue. We, therefore, confirm the findings of the ld. PCIT on the said issue of excess claim of depreciation on electrical installation and dismiss the grounds raised by the assessee challenging the validity of the order passed u/s. 263 of the Act on this issue. - Decided against assessee.

Summary

Issues Involved:
Jurisdiction invoked by PCIT under section 263 of the Income-tax Act, 1961 and validity of the impugned order.

Detailed Analysis:

Issue 1: Jurisdiction invoked by PCIT under section 263 of the Act
The appeal challenges the jurisdiction invoked by the Principal Commissioner of Income-tax (PCIT) under section 263 of the Income-tax Act, 1961. The assessee contends that the PCIT erred in assuming jurisdiction without satisfying the preconditions of an error in the assessment order being an error of law or fact. The PCIT initiated revisionary proceedings on issues already considered in rectification proceedings by the Assessing Officer, leading to an incorrect assumption of jurisdiction. The grounds of appeal primarily focus on the PCIT's jurisdictional validity.

Issue 2: Assessment Proceedings and Revisionary Proceedings
The case involves a private limited company providing consultancy services, with the assessment year 2014-15 under scrutiny. The assessment was completed initially, but the PCIT found certain issues unexamined and issued a show cause notice under section 263. The PCIT directed the Assessing Officer to re-examine specific issues, including differences in fixed asset addition, disallowance not pertaining to the appellant, and excess claim of depreciation. The subsequent assessment order by the AO addressed only two of the three issues raised by the PCIT.

Issue 3: Excess Claim of Depreciation on Electrical Installation
The live issue remaining pertains to the excess claim of depreciation on electrical installation. The assessee claimed depreciation at 15%, contrary to the prescribed rate of 10% under the Income-tax Rules. The PCIT directed the AO to examine this claim, leading to the primary contention in the appeal. The assessee argued that the claim was justified, supported by the Tax Auditor's certification and relevant case laws. However, the PCIT's findings highlighted the incomplete nature of the enquiry by the AO and the lack of satisfactory responses from the assessee, leading to the dismissal of the grounds challenging the PCIT's order on this issue.

Conclusion:
The Tribunal confirmed the PCIT's findings on the excess claim of depreciation on electrical installation, dismissing the appeal challenging the validity of the order passed under section 263 of the Act. The decision emphasized the importance of thorough enquiry and substantiated responses in assessment proceedings to support claims effectively. The appeal was ultimately dismissed, upholding the PCIT's jurisdiction and directions for re-examination of specific issues.