1997 (1) TMI 120 - AT - Income Tax

Assessing Officer, Assessment Order, Assessment Year, Orders Prejudicial To Interests, Previous Year, Triple Shift Allowance

Summary

Issues Involved:
1. Change of Previous Year
2. Excess Depreciation Allowance
3. Triple-Shift Depreciation on Plant & Machinery
4. Triple-Shift Depreciation on Generator
5. Jurisdiction and Procedural Fairness under Section 263

Issue-wise Detailed Analysis:

1. Change of Previous Year:
The CIT found that the assessee changed its accounting period without formal permission under section 3(4) of the Income-tax Act, 1961. The assessee argued that implied consent was given by the Assessing Officer (AO) as the assessment was completed for an 18-month period. The Tribunal, however, noted that neither the application nor the permission was on record, and the CIT was justified in finding the assessment erroneous and prejudicial to the revenue.

2. Excess Depreciation Allowance:
The CIT observed that excess depreciation was allowed due to the change in the accounting period and additional interest on borrowing. The assessee contended that the AO must have scrutinized these aspects. The Tribunal upheld the CIT's view, noting that the AO allowed these claims without proper enquiry, making the assessment erroneous and prejudicial to the revenue.

3. Triple-Shift Depreciation on Plant & Machinery:
The CIT noted that triple-shift depreciation was allowed without verifying the number of days the factory operated. The assessee argued that the AO must have examined this as the assessment was under section 143(3). The Tribunal found that the records did not show any such verification, supporting the CIT's conclusion that the assessment was erroneous and prejudicial to the revenue.

4. Triple-Shift Depreciation on Generator:
The CIT found that triple-shift depreciation was allowed on the generator, which is not typically permissible. The assessee claimed that this was allowed in the past. The Tribunal upheld the CIT's view, noting that the AO did not make necessary enquiries regarding the generator's working days, thus making the assessment erroneous and prejudicial to the revenue.

5. Jurisdiction and Procedural Fairness under Section 263:
The assessee argued that the CIT's notice did not mention excess depreciation and that proper opportunity to be heard was not provided. The Tribunal found that the CIT's notice did mention the relevant issues and that the assessee was given an opportunity to respond. The Tribunal also noted that the CIT's order was justified as the AO's assessment lacked proper enquiry and application of mind, making it erroneous and prejudicial to the revenue.

Conclusion:
The Tribunal upheld the CIT's order under section 263, finding that the AO's assessment was erroneous and prejudicial to the revenue due to lack of proper enquiry and application of mind regarding the change of previous year, excess depreciation, and triple-shift depreciation on plant, machinery, and generator. The appeal by the assessee was dismissed.