2022 (8) TMI 897 - AT - Income Tax

Revision u/s 263 - assessment was framed u/s. 143(3) - Disallowance of excess claim of depreciation on motor car, Excessive claim of depreciation on Energy Saving Device and Wind Turbine Generators and Disallowance u/s. 14A - difference in income shown by assessee and income transferred by Emtici Engineering Ltd. is on account of comparing the amount of income shown by assessee with amount on which TDS is deducted and also the service tax charged on that income - HELD THAT - There is a difference of income - This income was not considered by the assessing officer while passing the assessment order u/s. 143(3) of the Act, which is erroneous order and prejudicial to the interest of the revenue. It is further seen from record while the original assessment was completed the assessing officer has issued 143(2) notices calling from various details. The assessee have made detailed reply claiming the TDS credit availed by the assessee, the same is already been reproduced. There is an Indemnity Bond given by the assessee company to the assessing officer, as against the claim of TDS total credit from Emtici Engineering Ltd. and Prayas Engineering Ltd. vide Indemnity Bond dated 21.03.2016. Thus it cannot be said the assessing officer has not conducted proper enquiry before passing the above assessment order. In our considered view the assessing officer has clearly issued notices u/s. 143(2) from time to time calling from various details and on receipt of the reply from the assessee, with relevant records passed the above assessment order, which cannot be said neither erroneous order nor pre judicial to the interest of the revenue. Further we could see the assessee has followed Rule 37BA procedures by obtaining Indemnity Bond which containing the name, PAN No. of the person to whom credit is to be given amount of TDS and reasons for giving credit to such person. As rightly held in the case of Naresh Bhavani Shah (HUF) 2017 (7) TMI 819 - GUJARAT HIGH COURT that these conditions in brief are that the deductee files a declaration with the deductor in this respect, such declaration would contain the details of the person entitled to the credit and the reasons for giving such credit and lastly the deductor issues certificates for deducting tax at source in the name of such a person. Respectfully following the above judgment of the Hon ble Jurisdictional High Court, we have no hesitation in quashing the revision order passed u/s. 263 by the CIT- 2, Vadodara is not in accordance with law and therefore the same is hereby quashed. The grounds of appeal raised by the Assessee are hereby allowed.

Summary

Issues Involved:
1. Disallowance of excess claim of depreciation on motor car.
2. Excessive claim of depreciation on Energy Saving Device and Wind Turbine Generators.
3. Disallowance under Section 14A of the Income Tax Act.
4. Revision of assessment order under Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax (Pr.CIT).

Detailed Analysis:

Issue 1: Disallowance of Excess Claim of Depreciation on Motor Car
The original assessment order dated 22.03.2016 included a disallowance of excess claim of depreciation on motor car. The assessee's claim was scrutinized, and the disallowance was made accordingly.

Issue 2: Excessive Claim of Depreciation on Energy Saving Device and Wind Turbine Generators
Similarly, the assessment order also addressed the excessive claim of depreciation on Energy Saving Device and Wind Turbine Generators. These claims were reviewed and disallowed as part of the scrutiny assessment.

Issue 3: Disallowance under Section 14A of the Income Tax Act
The assessment included disallowance under Section 14A of the Act. The scrutiny assessment resulted in this disallowance being made after detailed discussions and review of the relevant information.

Issue 4: Revision of Assessment Order under Section 263
The Pr.CIT issued a show cause notice under Section 263, questioning the non-disclosure of income amounting to Rs. 4,18,31,681/-. The Pr.CIT observed that the assessment order was erroneous and prejudicial to the interests of the revenue. The notice highlighted discrepancies in the income transferred among Elecon Engineering Co. Ltd., Elecon EPC Projects Ltd., and Emtici Engineering Ltd. following a Scheme of Arrangement sanctioned by the Gujarat High Court.

Assessee's Response:
The assessee argued that there was no income escaping assessment and that the difference in income was due to the inclusion of service tax in the income on which TDS was deducted. The assessee provided a detailed breakdown of the commission income transferred and supported their claim with an Indemnity Bond, asserting that proper enquiry had been conducted by the assessing officer.

Tribunal's Findings:
The Tribunal found that the assessing officer had conducted thorough enquiries, issued notices, and received detailed replies from the assessee before passing the assessment order. The Tribunal noted that the Pr.CIT failed to verify the assessment records properly and wrongly invoked Section 263. The Tribunal referenced the Gujarat High Court judgment in Naresh Bhavani Shah (HUF) vs. CIT, emphasizing that the conditions for granting TDS credit to a person other than the deductee were met by the assessee.

Conclusion:
The Tribunal concluded that the original assessment order was neither erroneous nor prejudicial to the interest of the revenue. The revision order dated 27.03.2018 passed under Section 263 by the Pr.CIT was quashed. The grounds of appeal raised by the assessee were allowed.

Identical Grounds in Elecon EPC Projects Ltd.:
The revision order in the case of Elecon EPC Projects Ltd. (ITA No. 1403/Ahd/2018) was also quashed on identical grounds as those in ITA No. 1402/Ahd/2018.

Result:
Both appeals filed by the assessee were allowed, and the revision orders were quashed. The order was pronounced in the open court on 13-07-2022.