2023 (3) TMI 1104 - AT - Income Tax

Rectification application u/s 154 for allowing the enhanced claim of depreciation - claim of depreciation which has been wrongly claimed as per the provisions of Companies Act whereas the same have to be claimed as per the provisions of the Income Tax Act - As submitted that during the course of assessment proceedings, the assessee brought to the notice of the AO that while filing its return of income it had inadvertently and wrongly taken opening balance of WDV of fixed assets as per the Companies Act instead of Income Tax Act and the AO has not given effect to its bonafide error - HELD THAT - As per the depreciation chart for A.Y. 2015-16, the closing WDV as on 31/03/2015 has been shown at Rs. 2,70,39,004/- and as per the depreciation chart for A.Y 2016-17, WDV on fixed assets as on 01/04/2015 has been taken at Rs. 2,20,00,290/- which clearly shows that there is some error which has crept in while taking the opening balance of WDV as on 01/04/2015 instead of the closing WDV for the previous year which by default will become the opening WDV for the year under consideration. None of the lower authorities have disputed the said factual matrix of the case in terms of both the computation of depreciation as per Income Tax Act and relates rules, and the quantum thereof so reflected in the tax returns of both the years and same being clearly a mistake which is apparent from the record and in respect of which there could not be any two opinions, being purely a factual matter which is clearly emerging from the record, we hereby direct the AO to take into consideration the opening balance of WDV and work out the claim of the depreciation and determine taxable income accordingly. Appeal of the assessee is allowed.

Summary

Issues: Delay in filing appeal, Claim of depreciation under section 154 of the Income Tax Act, 1961, Rejection of rectification application by Assessing Officer, Appeal before the Ld. CIT(A) and Appellate Tribunal.

Delay in Filing Appeal:
The appeal was filed with a delay of 74 days due to the COVID-19 pandemic, which was condoned by the Appellate Tribunal after considering the circumstances and the affidavit filed by the assessee company.

Claim of Depreciation under Section 154:
The assessee filed a rectification application under section 154, seeking to correct the depreciation claim for Assessment Year 2016-17. The claim was based on the assertion that the opening balance of WDV of fixed assets was wrongly taken as per the Companies Act instead of the Income Tax Act, resulting in an enhanced claim of depreciation of Rs. 48,88,526 instead of Rs. 41,44,887. The AO rejected the application, stating that the mistake could have been rectified by filing a revised return under section 139(5).

Rejection of Rectification Application by Assessing Officer:
The Assessing Officer rejected the rectification application under section 154, emphasizing that the claim did not fall within the ambit of the provision as the mistake was made while filing the original return under section 139(1) and could have been rectified through a revised return under section 139(5).

Appeal Before the Ld. CIT(A) and Appellate Tribunal:
The assessee appealed to the Ld. CIT(A), arguing that the mistake in claiming depreciation was apparent from the record and did not require a long process of reasoning. The Ld. CIT(A) upheld the AO's decision, citing the restriction on the power of the AO to entertain claims other than through a revised return. However, the Appellate Tribunal found that the error in claiming depreciation was clear and directed the AO to consider the correct opening balance of WDV for computing taxable income, ultimately allowing the appeal of the assessee.

Separate Judgement by Appellate Tribunal:
The Appellate Tribunal, after considering the factual matrix and the claim of depreciation, directed the Assessing Officer to reevaluate the depreciation claim based on the correct opening balance of WDV, leading to the allowance of the assessee's appeal.