2016 (10) TMI 158 - AT - Income Tax

Allowance of depreciation - rectification of mistake - whether Ld.CIT(A) is justified in granting relief to the assessee by allowing the depreciation without appreciating that the issue involved is debatable in nature and therefore cannot be considered in the proceedings u/s.154 of the IT Act? - Held that - We note that the impugned order has been passed by the CIT (Appeals) in the appeal filed on 27.1.2010 against the assessment order dt.23.12.2009. Therefore proceedings before the CIT (Appeals) were against the assessment order and not against the rectification order passed under Section 154 of the Act however, the CIT (Appeals) has considered the claim of the assessee which was raised in the rectification petition filed under Section 154. Without going into the issue of the scope of section 154 of the Act, we are of the view that when the CIT (Appeals) has the jurisdiction to entertain the said claim raised by the assessee in the petition under Section 154 in the appellate proceedings against the assessment order then the issue can be looked into only from the angle of the allowability of the claim on merits. We find that both these claims were covered by the various decisions of Hon ble High Courts including the Hon ble jurisdictional High Court and therefore there was no error or illegality in the order of the CIT (Appeals) in entertaining such claims of the assessee which are covered by binding precedence As it is clear from the findings of the CIT (Appeals) that both the claims of the earlier year expenditure adjusted against the current year s income as well as depreciation on fixed assets are covered by the decision of the Hon ble jurisdictional High Court as well as the decision of this Tribunal. Accordingly, in view of the facts and circumstances of the case when the CIT (Appeals) has entertained and allowed the claims of the assessee in the appeal filed against the assessment order then the issue of scope of section 154 becomes irrelevant and academic in nature. Hence we do not find any reason to interfere with the impugned order of the CIT (Appeals). - Decided against revenue

Summary

Issues:
1. Allowance of depreciation without emanating from the order passed under IT Act.
2. Justification of granting relief to the assessee for debatable issues.
3. Eligibility of the assessee to carry forward earlier year expenditure and adjust it towards current year income.
4. Justification of holding the assessee eligible to carry forward earlier year expenditure without provision under the act.

Issue 1:
The revenue appealed against the order of the Commissioner of Income Tax (Appeals) regarding the allowance of depreciation without emanating from the order passed under the IT Act. The revenue contended that the CIT (Appeals) was not justified in allowing the claim of the assessee as it was beyond the scope of rectification under Section 154. The revenue argued that only apparent mistakes on the face of the record could be rectified under Section 154, and the claim of depreciation could not be considered as such an error.

Issue 2:
The question arose whether the CIT (Appeals) was justified in granting relief to the assessee for debatable issues. The revenue argued that the issues raised by the assessee were debatable in nature and could not be considered under Section 154 of the IT Act. However, the assessee's representative contended that the claims were supported by decisions of the Hon'ble jurisdictional High Court and various Tribunal decisions, making them apparent errors on record. The CIT (Appeals) had jurisdiction to entertain such claims in the appeal proceedings.

Issue 3:
Regarding the eligibility of the assessee to carry forward earlier year expenditure and adjust it towards current year income, the CIT (Appeals) allowed the claim of the assessee in respect of the earlier year expenditure adjusted towards the current year income. The revenue challenged this decision, arguing that the claim could not be entertained under Section 154. The CIT (Appeals) based the decision on various High Court decisions, holding that the claims were covered by binding precedence.

Issue 4:
The question of whether the assessee was justified in carrying forward the earlier year expenditure without provision under the act was raised. The CIT (Appeals) allowed the claim of the assessee in this regard, citing decisions of the Hon'ble jurisdictional High Court and the Tribunal. The revenue contended that the claim was beyond the scope of rectification under Section 154, but the CIT (Appeals) upheld the claim based on the binding precedence of the High Court decisions.

In conclusion, the Appellate Tribunal upheld the decision of the CIT (Appeals) in allowing the claims of the assessee related to depreciation, earlier year expenditure adjustment, and eligibility to carry forward expenditure. The Tribunal held that the claims were covered by binding precedence and decisions of the High Court, making them apparent errors on record. The Tribunal dismissed the revenue's appeal, emphasizing that the CIT (Appeals) had the jurisdiction to entertain such claims in the appeal proceedings against the assessment order.