2001 (1) TMI 226 - AT - Income Tax

Summary

Issues:
1. Disallowance of depreciation claim of Rs. 1,75,742 on flour mill rollers by AO.
2. Dispute over allowing 100% depreciation on flour mill rollers.
3. Legality of prima facie adjustment under section 143(1)(a).
4. Permission to raise an additional ground regarding the deletion of additional tax.

Analysis:

Issue 1: Disallowance of depreciation claim on flour mill rollers
The Revenue appealed against the order of CIT(A) disallowing the depreciation claim of Rs. 1,75,742 on flour mill rollers. The AO had allowed only 33.33% depreciation on the rollers, citing that they were part of the entire plant and not usable separately. The assessee contended that the printing error in the term "flour mill" as "floor mill" led to confusion. The Tribunal noted that the issue of allowing 100% depreciation on flour mill rollers was debatable and required proper interpretation of the law. It was held that debatable issues do not fall under prima facie adjustment under section 143(1)(a). The Tribunal found the CIT(A)'s order deleting the disallowance of depreciation to be proper and justified.

Issue 2: Dispute over allowing 100% depreciation on flour mill rollers
The Revenue argued against allowing 100% depreciation on flour mill rollers, stating that it was the first year of the assessee's business and the machinery was newly installed. The assessee contended that the issue was debatable and could not be subject to prima facie adjustment. The Tribunal distinguished a cited case and emphasized that the separate rate of depreciation for rollers of flour mill warranted a detailed interpretation of the law, which could not be a basis for disallowance under section 143(1)(a).

Issue 3: Legality of prima facie adjustment under section 143(1)(a)
The Tribunal highlighted that debatable issues or those requiring lengthy arguments for a decision do not fall within the scope of prima facie adjustment under section 143(1)(a). It was noted that issuing an intimation under section 143(1)(a) after issuing a notice under section 143(2) was not legally valid, citing relevant court decisions. The Tribunal concluded that the AO's disallowance of depreciation on flour mill rollers was not justified and upheld the CIT(A)'s order.

Issue 4: Permission to raise an additional ground regarding deletion of additional tax
The Revenue sought permission to raise an additional ground regarding the deletion of additional tax levied under section 143(1A). However, the Tribunal rejected this request, stating that the additional ground did not arise from the CIT(A)'s order and was only consequential to the main issue already decided. The Tribunal dismissed the appeal of Revenue, upholding the decision of the CIT(A) regarding the disallowance of depreciation on flour mill rollers.