1982 (7) TMI 109 - AT - Income Tax

Summary

Issues:
Jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961 regarding depreciation allowance on Tower Crane.

Detailed Analysis:

Jurisdiction Issue:
The appeal pertains to the objection filed by West Coast Construction Co. against the order of the Commissioner, Karnataka-I, under section 263 of the Income-tax Act, 1961, for the assessment year 1979-80. The Commissioner issued a notice under section 263 regarding the depreciation allowed on Tower Crane at 30%, which the assessee claimed was erroneous. The assessee contended that the order of the ITO had merged with the order of the Commissioner (Appeals) and relied on the decision of the Karnataka High Court in Vijayalakshmi Lorry Service case. However, the Commissioner followed a decision of the Gujarat High Court and rejected the assessee's objection on jurisdiction. The Commissioner also dismissed the assessee's explanation that the Tower Crane was eligible for a 30% depreciation allowance as earth-moving machinery used in dam construction. The Tribunal considered the jurisdiction issue and held that the Commissioner was not justified in ignoring the binding decision of the Karnataka High Court, which favored the assessee. The Tribunal emphasized that the power under section 263 is available only against the order of the ITO and not against the order of the AAC, as per the legal position established by various High Court decisions.

Merits Issue:
The learned counsel for the assessee reiterated objections to the Commissioner's jurisdiction and claimed the entitlement to the depreciation allowance on merits. The departmental representative argued that there was no active application of mind by the ITO on the depreciation issue and supported the Commissioner's decision to presume prejudice against revenue. However, the Tribunal did not delve into the merits issue as it found in favor of the assessee on the jurisdictional grounds. The Tribunal concluded that the order of the ITO had merged with the orders of the appellate authorities and, therefore, was not available for action under section 263, even for matters not addressed in the appellate orders. Consequently, the Tribunal allowed the appeal, canceled the Commissioner's order, and restored the original assessment as modified in appeals.

This judgment highlights the importance of adhering to legal precedents, especially when determining jurisdictional matters under tax laws. It underscores the significance of the doctrine of merger in preventing re-examination of issues already decided by appellate authorities. The Tribunal's decision showcases the application of legal principles to uphold the rights of taxpayers and ensure procedural fairness in tax assessments.