2008 (6) TMI 269 - AT - Income Tax

Summary

Issues Involved:
1. Claim of depreciation on five trucks.
2. Source of unexplained cash amounting to Rs. 2,36,000.
3. Deletion of addition of Rs. 2,20,979 out of total addition of Rs. 4,56,979 on account of unexplained credits.
4. Validity of raising new issues in limited scrutiny without formal notice.

Summary:

1. Claim of Depreciation on Five Trucks:
The Revenue challenged the CIT(A)'s decision allowing the assessee's claim of depreciation on five trucks purchased from her husband, arguing there was no valid transfer as the trucks were still registered in the husband's name. The CIT(A) allowed the claim based on several judgments, including *Mysore Minerals Ltd. vs. CIT* and *CIT vs. Basti Sugar Mills Co. Ltd.*, which held that beneficial ownership and usage for business purposes entitle the assessee to depreciation, even if the vehicles are not registered in their name. The Tribunal upheld the CIT(A)'s decision, emphasizing that the term "ownership" should be interpreted broadly to include beneficial ownership.

2. Source of Unexplained Cash Amounting to Rs. 2,36,000:
The assessee contested the CIT(A)'s decision holding Rs. 2,36,000 as unexplained cash, arguing that this issue was beyond the scope of limited scrutiny. The Tribunal noted that the issue of whether the AO could raise new issues in a limited scrutiny case without formal notice needed to be addressed.

3. Deletion of Addition of Rs. 2,20,979 on Account of Unexplained Credits:
The Revenue also contested the deletion of Rs. 2,20,979 out of the total addition of Rs. 4,56,979 made on account of unexplained credits. The Tribunal decided to address the procedural aspect of whether the AO could take up new issues in a limited scrutiny case.

4. Validity of Raising New Issues in Limited Scrutiny Without Formal Notice:
The Tribunal examined the procedural validity of the AO raising new issues during limited scrutiny without formal notice, referencing CBDT Instruction No. 5/2002. The Tribunal restored the issue to the CIT(A) to determine if the AO's actions violated Board Instructions and whether such a violation would invalidate the assessment on that issue. The Tribunal emphasized the need for formal notice for new issues in limited scrutiny cases.

Conclusion:
The Tribunal partly dismissed and partly allowed the Revenue's appeal for statistical purposes and allowed the assessee's appeal for statistical purposes, directing the CIT(A) to address the procedural validity of raising new issues in limited scrutiny cases.