2000 (8) TMI 279 - AT - Income Tax

Summary

Issues Involved:
1. Validity of Assessment Order
2. Undisclosed Income Assessment
3. Depreciation on Trucks
4. Set-off of Unabsorbed Depreciation
5. Depreciation for Broken Period
6. Disallowance of Expenses
7. Interest on Borrowed Funds
8. Credit for Advance Tax/TDS
9. Tax Rate on Undisclosed Income for Specific Periods
10. General Grounds

Summary:

Issue 1: Validity of Assessment Order

The assessee argued that the AO should have considered the return of income filed for the block period before the completion of the assessment. The Tribunal held that the assessment order passed by the AO is valid and not null and void. The AO is directed to take cognizance of the entire return instead of only part of it, as there was no outer time-limit for filing returns u/s 158BC(a)(i).

Issue 2: Undisclosed Income Assessment

The assessee challenged the various additions made to the undisclosed income. The Tribunal noted this as a general ground and did not provide specific comments.

Issue 3: Depreciation on Trucks

The AO adopted a WDV of Rs. 1,000 for trucks acquired prior to the block period and those transferred within the block period. The Tribunal held that the AO's method of computing WDV is legally incorrect. Depreciation should be allowed based on the actual cost to the assessee in case of trucks acquired in the previous year and actual cost less depreciation actually allowed for trucks acquired before the previous year, as per s. 43(6).

Issue 4: Set-off of Unabsorbed Depreciation

The AO ignored the negative income arising from depreciation in computing total undisclosed income. The Tribunal directed the AO to determine profits and losses on account of unabsorbed depreciation for each previous year without setting off unabsorbed depreciation of earlier years, and then aggregate the income or loss as per s. 158BB.

Issue 5: Depreciation for Broken Period

The AO granted depreciation at 5/12th of the allowable depreciation for the period from 1st April, 1996 to 12th Sept., 1996. The Tribunal directed the AO to allow depreciation at 50% of the allowable depreciation for the broken period, as the broken period is considered a previous year.

Issue 6: Disallowance of Expenses

The AO disallowed a part of truck expenses, trip expenses, and administrative expenses. The Tribunal restored the issue to the AO, directing him to consider the returns filed by the assessee and verify expenses with supporting data instead of making ad hoc disallowances.

Issue 7: Interest on Borrowed Funds

The AO allowed only part of the interest claimed by the assessee. The Tribunal restored the issue to the AO, directing him to verify the assessee's claim regarding interest with basic supporting data and allow the interest as a permissible outgoing.

Issue 8: Credit for Advance Tax/TDS

The AO did not grant credit for advance tax or TDS. The Tribunal held that there is no provision for adjustment of advance tax or TDS against tax due under Chapter XIV-B, and rejected the assessee's contention.

Issue 9: Tax Rate on Undisclosed Income for Specific Periods

The Tribunal found this ground to be infructuous as there was no undisclosed income for the relevant periods in the assessee's case.

Issue 10: General Grounds

The Tribunal noted that this ground is general in nature and calls for no comments.

Conclusion:

The appeal is allowed in part, with directions to the AO to reconsider various issues based on the Tribunal's findings.