1996 (12) TMI 120 - AT - Income Tax

Assessing Officer, Assessment Year, Industrial Undertaking, Orders Prejudicial To Interests, Rate Of Depreciation, Special Rate

Summary

Issues Involved:
1. Legality of the notice issued under Section 263.
2. Validity of the CIT's order setting aside the entire assessments.
3. Applicability of the depreciation rate on crawler cranes.

Detailed Analysis:

1. Legality of the notice issued under Section 263:

The CIT issued a notice under Section 263, stating that the assessment orders for the years 1985-86 and 1986-87 were erroneous and prejudicial to the interest of the revenue due to the allowance of excess depreciation at 40% instead of 15% on two crawler cranes. However, the notice did not provide any specific basis or grounds for this assertion. The Tribunal noted that the CIT's notice was a cyclostyled form with blanks filled in, showing a lack of application of mind to the facts of the case. Citing precedents, the Tribunal emphasized that a show-cause notice must fairly indicate the grounds for the proposed revision to provide the assessee a fair opportunity to respond. The Tribunal concluded that the notice under Section 263 was defective and could not sustain the CIT's order.

2. Validity of the CIT's order setting aside the entire assessments:

The CIT set aside the entire assessments for the years 1985-86 and 1986-87, directing the ACIT to verify the nature of the crane and the claim that the assessee is an industrial undertaking. The Tribunal found this approach inappropriate, as the CIT's revisionary powers under Section 263 are limited to correcting errors prejudicial to the revenue. The Tribunal cited the Hon'ble Delhi High Court's judgment, which held that the CIT should not set aside entire assessments when only specific issues are in question. Moreover, the Tribunal noted that the CIT's directions were confusing and incapable of implementation, particularly the corrigendum issued on 15-11-1991, which was time-barred and vague.

3. Applicability of the depreciation rate on crawler cranes:

The core issue was whether the crawler cranes qualified for a 40% depreciation rate as motor tractors under Appendix I, Part I, Item III, Section D(9A) of the Depreciation Table. The assessee argued that the crawler cranes were heavily treaded and used for drawing cranes within the project area, fitting the definition of motor tractors. The CIT disagreed, stating that the cranes were not registered as transport vehicles and moved only within the Harbour area. The Tribunal examined the definitions and the brochure provided by the assessee, which described the crawler cranes as tractor-type crawlers with various attachments, including cranes. The Tribunal concluded that the crawler cranes could not be classified as general machinery and plant subject to a 15% depreciation rate. Instead, they qualified for the special rate of 40% applicable to motor tractors, as granted by the Assessing Officer.

Conclusion:

The Tribunal held that the CIT's order under Section 263 dated 30-3-1990 could not be sustained due to the defective notice, inappropriate setting aside of entire assessments, and the incorrect conclusion regarding the depreciation rate. The appeals were allowed, and the CIT's order was quashed.