2024 (9) TMI 1454 - HC - Income Tax

Validity of reassessment proceedings - Challenge to the assessment order rejected by giving liberty to the appellant to work out the remedy before the appellate authority - availability of depreciation which the appellant had availed on the vehicles - HELD THAT - Single Judge in both the writ petitions was that after the assessment was completed on 24.10.2014 for the assessment year 2007-08 u/s 148(3) of the Income Tax Act, 1961 and invocation of power u/s 148, ibid ., for the purpose of Section 147, ibid. , on 01.03.2013 was bad and therefore, overruling of the objection of the appellant was bad. Consequently, the impugned assessment order dated 24.10.2014 was also without jurisdiction. As a matter of fact, the issue on the availability of depreciation which the appellant had availed, appears to have been answered by the Hon'ble Supreme Court in Industrial Credit and Development Syndicate Limited. 2013 (1) TMI 344 - SUPREME COURT held if the lessee was in fact the owner, he would have claimed depreciation on the vehicles, which, as specifically recorded in the order of the Appellate Tribunal, was not done. It would be a strange situation to have no claim of depreciation in case of a particular depreciable asset due to a vacuum of ownership. The entire lease rent received by the assessee is assessed as business income in its hands and the entire lease rent paid by the lessee has been treated as deductible revenue expenditure in the hands of the lessee. This reaffirms the position that the assessee is in fact the owner of the vehicle, insofar as Section 32 of the Act is concerned We are, therefore, of the view that no useful purpose will be served by remitting the matter to the learned Single Judge to pass orders on merits, as it would result in wastage of judicial time. To balance the interest of the appellant and the Income Tax Department, we deem it fit to quash the impugned assessment order dated 24.10.2019 and remit the case to the Assessing Officer to pass fresh orders on merits, in the light of the decision of Industrial Credit and Development Syndicate Limited - AO shall examine the issue afresh and pass orders on merits. Needless to state, the appellant shall be heard before passing orders.

Summary

Issues:
Challenge to assessment order under Income Tax Act, 1961.

Analysis:
The judgment involves a challenge to an assessment order dated 24.10.2014 under the Income Tax Act, 1961. The appellant leased computer items to Neyveli Lignite Corporation (NLC) under a Tripartite Lease Agreement dated 26.05.2006. The agreement specified that only NLC would avail income tax depreciation. The appellant challenged the assessment order on the grounds that the invocation of power under Section 148 for re-opening the assessment was improper. The appellant contended that the assessment order lacked jurisdiction.

The learned Single Judge dismissed the appellant's writ petitions without discussing the merits of the case. However, the Hon'ble Supreme Court's decision in Industrial Credit and Development Syndicate Limited vs. Commissioner of Income Tax, Mysore and Another [(2013) 3 SCC 541] provided guidance on the issue of ownership and depreciation. The Supreme Court's ruling indicated potential merit in the appellant's claim regarding ownership and depreciation.

In light of the Supreme Court's decision, the High Court deemed it unnecessary to remit the matter to the Single Judge for a decision on merits, as it would result in a waste of judicial time. To balance the interests of the appellant and the Income Tax Department, the High Court quashed the assessment order dated 24.10.2014 and remitted the case to the Assessing Officer. The Assessing Officer was directed to re-examine the issue of ownership and depreciation afresh and pass orders on merits, ensuring the appellant's right to be heard.

Therefore, the writ appeal was disposed of with the direction to the Assessing Officer to reconsider the matter in light of the Supreme Court's decision, ensuring a fair hearing for the appellant. No costs were awarded, and the connected Civil Miscellaneous Petition was closed.