2022 (11) TMI 307 - AT - Income Tax

Rectification of mistake - Excess depreciation has been allowed to the assessee in respect of Multiple Effect Evaporator Plant(MEEP) - HELD THAT - As assessee submitted that MEE Plant falls within the meaning of Pollution Control equipment eligible for higher rate of depreciation @ 80% whereas, according to the Assessing Officer the said equipment does not help in pollution control and is not eligible for higher rate depreciation. The Assessing Officer examined assessee s claim of depreciation during the course of scrutiny assessment proceedings and allowed the same. Now, on change of opinion the Assessing Officer is disallowing assessee s claim of higher depreciation. The issue is highly debatable and hence, cannot be subject matter of proceedings u/s. 154 of the Act. Short deduction of TDS on payment of rent - The assessee has furnished copy of letter addressed to Maharashtra Pollution Control Board, wherein it is mentioned that MEE Plant is an advanced technology plant to control pollution. The equipment which could be used for greater efficiency which also results in reduction of pollution whether such equipment can be categorized as pollution control equipment requires consideration and debate. Thus, MEE Plant whether eligible for higher rate of depreciation is a subject matter of debate which could not have been settled in rectification proceedings under section 154 of the Act. The other issue is short deduction of TDS on payment of rent. The Hon ble Calcutta High Court in the case of CIT vs. S.K.Tekriwal, 2012 (12) TMI 873 - CALCUTTA HIGH COURT has held that where there is shortfall in deduction of TDS no disallowance can be made by invoking the provisions of section 40(a)(ia). Thus, in the light of above decision no disallowance under section 40(a) (ia) could have been made in the case of assessee. We see no infirmity in the impugned order warranting interference. The same is upheld and appeal by Revenue is dismissed being devoid of any merit.

Summary

Issues Involved:
1. Validity of order passed under section 154 of the Income Tax Act.
2. Whether the rectifications made by the Assessing Officer in proceedings under section 154 are on debatable issues.

Issue 1: Validity of order passed under section 154 of the Income Tax Act:
The appeal was against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2009-10. The Assessing Officer had issued a notice under section 154 to rectify alleged mistakes in the assessment order related to excess depreciation on a plant and short deduction of TDS on rent payment. The order passed under section 154 was challenged by the assessee, leading to the present appeal. The Department argued that rectification proceedings were within the limitation period, while the assessee contended that the order was beyond the time limit specified under section 154(7) of the Act. The Tribunal held that the order passed under section 154 was beyond the limitation period, as the Assessing Officer revived the proceedings after a significant delay, making the order non-est.

Issue 2: Whether the rectifications made by the Assessing Officer in proceedings under section 154 are on debatable issues:
The Assessing Officer sought to rectify the depreciation claim on a plant and the short deduction of TDS on rent payment in the section 154 proceedings. The assessee argued that these issues were debatable and could not be subject to rectification under section 154. The Tribunal considered the nature of the issues raised, particularly regarding the higher depreciation claim on the plant. The assessee provided evidence that the plant contributed to pollution control, justifying the higher depreciation rate claimed. The Tribunal found that the eligibility of the plant for higher depreciation was a debatable issue that could not be resolved through rectification under section 154. Additionally, the Tribunal referred to a High Court decision regarding TDS deduction, supporting the assessee's position. Consequently, the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal for lack of merit.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the Tribunal's reasoning in arriving at the decision.