2022 (7) TMI 994 - AT - Income Tax

Revision u/s 263 by CIT - claim of higher depreciation at the rate of 30% on vehicles - HELD THAT - In the instant set of facts, we note that the claim of higher depreciation at the rate of 30%, which is available to the assessees engaged in the business of letting out vehicles on hire was not examined by the assessing officer during the course of assessment proceedings. Even in the 263 proceedings before Ld. Pr. CIT and in the proceedings before us, the learned counsel for the assessee has not been able to bring anything on record to substantiate that the assessee was primarily engaged in the business of letting out vehicles on hire, so as to be eligible for claim of higher rate of depreciation on vehicles @30%. We are of the considered view that Ld. Pr. CIT has not erred in facts and in law in coming to the conclusion that the assessment order is erroneous and prejudicial to the interests of the revenue. - Decided against assessee.

Issues Involved:
1. Legality of the order passed under section 263 of the Income Tax Act.
2. Adequacy of enquiries made by the Assessing Officer (A.O.) during the original assessment proceedings.
3. Eligibility for higher depreciation rate of 30% on trucks.

Detailed Analysis:

1. Legality of the Order Passed Under Section 263:
The appellant contended that the Principal Commissioner of Income Tax (Pr. CIT) erred in law and on facts by passing an order under section 263 of the Income Tax Act, 1961. The appellant argued that the facts and circumstances did not warrant such an order, and it should be quashed.

2. Adequacy of Enquiries Made by the Assessing Officer During the Original Assessment Proceedings:
The appellant claimed that necessary enquiries related to the issue under consideration were already made by the A.O. during the original assessment proceedings, which resulted in an order under section 143(3) of the Act. The appellant argued that it cannot be said that there was no enquiry or a lack of enquiry on the part of the A.O. that would render the order erroneous and prejudicial to the interest of the revenue.

3. Eligibility for Higher Depreciation Rate of 30% on Trucks:
The appellant filed its return of income for the assessment year 2014-15, claiming depreciation at 30% on the opening Written Down Value (WDV) of ?22.95 lakhs under the head "plant and machinery." The Pr. CIT noticed that no such asset eligible for 30% depreciation was found under "plant and machinery" and that the allowable depreciation should be 15%, not 30%. The Pr. CIT issued a notice under section 263, and the appellant contended that the trucks were used for delivering potatoes, earning freight income, and thus the assessment order was not erroneous or prejudicial to the revenue's interests.

Findings and Judgment:

1. Examination of Enquiries Conducted by the A.O.:
The Pr. CIT observed that the A.O. did not conduct necessary enquiries to ensure the trucks were used for running on hire separately from the business of trading in potatoes, which is required to qualify for 30% depreciation. The Pr. CIT found no evidence of truck operating expenses, such as driver's salary, diesel, or toll tax, which are essential to substantiate the claim of higher depreciation.

2. Analysis of the Appellant's Submissions:
The appellant's counsel argued that the term "vehicles" was not mentioned in the show-cause notice and pointed out that truck carting expenses were claimed. The counsel also referenced a case (Swati Synthetics Ltd. v. ITO) to argue that once an asset enters the block of assets and depreciation is allowed in earlier years, it should continue to be allowed. However, the Departmental Representative countered that the primary issue was whether the trucks were used for letting out on hire, which was not substantiated by the financial records.

3. Tribunal's Conclusion:
The Tribunal noted that there was no evidence to demonstrate that the appellant was engaged in the business of letting out vehicles on hire, which is a prerequisite for claiming higher depreciation at 30%. The Tribunal emphasized that the principle of res judicata does not apply to tax assessments for different years, and an incorrect claim allowed in a previous year does not bind the revenue authorities in subsequent years. The Tribunal upheld the Pr. CIT's decision that the assessment order was erroneous and prejudicial to the revenue's interests due to the lack of necessary enquiries by the A.O.

Final Judgment:
The appeal of the appellant was dismissed, and the order passed by the Pr. CIT under section 263 was upheld. The A.O. was directed to make a fresh assessment after conducting proper enquiries and verification. The judgment was pronounced in the open court on 29-06-2022.

← Previous Next →