2006 (1) TMI 194 - AT - Income Tax

Issues Involved:

1. Validity of the notice under Section 148.
2. Entitlement to investment allowance under Section 32A.
3. Claim for 100% depreciation on bottles and crates during reassessment proceedings.
4. Withdrawal of excess depreciation on generators.
5. Charging of interest under Sections 216 and 217.

Issue-wise Detailed Analysis:

1. Validity of the notice under Section 148:

The assessee challenged the validity of the notice under Section 148 on the grounds that the Assessing Officer (AO) did not provide a copy of the reasons recorded for issuance of the notice. The Tribunal found that since the reasons recorded by the AO had already been supplied to the assessee and were part of the paper book, there was no substance in the grievance. The Tribunal dismissed the ground, holding that the notice issued under Section 148 was valid and within the period specified under Section 149 read with Section 151 of the Act. The Tribunal also noted that the second notice issued to rectify the technical defect of the first notice was valid, and the proceedings initiated were within the jurisdiction of the AO.

2. Entitlement to investment allowance under Section 32A:

The assessee claimed investment allowance under Section 32A, which was initially disallowed by the AO on the grounds that the assessee was not a small-scale industrial undertaking (SSI) and manufactured items specified in the Eleventh Schedule of the IT Act. The Tribunal found that the assessee was recognized as an SSI by the Director of Industries and, therefore, entitled to the investment allowance. The Tribunal relied on the decision in the case of Indian Communication Network Ltd. vs. IAC, which held that recognition by the Directorate of Industries should be adopted for the purposes of the IT Act. The Tribunal directed the AO to examine the allowability of the investment allowance and creation of the investment allowance reserve.

3. Claim for 100% depreciation on bottles and crates during reassessment proceedings:

The assessee claimed 100% depreciation on new bottles purchased during the year in the reassessment proceedings. The AO disallowed the claim, stating that the proceedings under Section 147 are for the benefit of the Revenue and not the assessee. The Tribunal upheld the AO's decision, citing the Supreme Court's ruling in CIT vs. Sun Engineering Works (P) Ltd., which stated that reassessment proceedings cannot be used by the assessee to claim reliefs not claimed in the original assessment unless related to escaped income.

4. Withdrawal of excess depreciation on generators:

The assessee claimed higher depreciation at 30% on generators, which was initially allowed in the original assessment but later withdrawn by the AO in the reassessment proceedings. The Tribunal reversed the AO's decision, relying on the jurisdictional High Court's decision in CIT vs. Agarwal Transformers (P) Ltd., which held that electric generators fall under renewable energy devices and are eligible for 30% depreciation.

5. Charging of interest under Sections 216 and 217:

The AO charged interest under Sections 216 and 217, which was confirmed by the CIT(A). The Tribunal, however, found that interest under these sections is chargeable only up to the date of regular assessment and not reassessment. The Tribunal relied on the jurisdictional High Court's decision in CIT vs. Smt. Padam Kumari Surana, which held that regular assessment means the assessment made under Sections 143 or 144 and does not include reassessment under Section 147.

Conclusion:

The appeals were partly allowed, with the Tribunal upholding the validity of the notice under Section 148 and the withdrawal of the claim for 100% depreciation on bottles and crates, while reversing the decisions on investment allowance and higher depreciation on generators. The charging of interest was limited to the date of regular assessment.

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