2021 (3) TMI 814 - AT - Income Tax

Revision u/s 263 - disallowing claim of depreciation - application filed by the assessee making an alternative claim of amortization of expenditure incurred in the BOT project - AO passed an order under section 154 of the Act on 14-03-2019 allowing assessee's claim of amortization in terms of CBDT circular No. 9 of 2014 - HELD THAT - While deciding assessee's appeal against disallowance of depreciation on BOT project, Commissioner (Appeals) has directed the assessing officer to allow the claim of depreciation. It is observed, in the fresh assessment order passed under section 143(3) r.w.s. 263 of the Act the assessing officer, after verifying the details, has recorded a categorical finding that the expenditures claimed by the assessee on the BOT project are genuine. AO has also given effect to the directions of learned Commissioner (Appeals) by allowing depreciation on the BOT project. AO has carried out the directions of, both, PCIT and learned Commissioner (Appeals) in letter and spirit. Validity of assumption of jurisdiction u/s 263 - In principle, we agree with the learned Counsel for the assessee that the reassessment order cannot be held as either erroneous or prejudicial to the interest of revenue, as, the assessment was reopened only for the purpose of disallowing assessee's claim of depreciation. In the reassessment proceeding the assessing officer was not required to examine the genuineness of expenditure capitalized as it was a subject matter of original assessment proceeding. Be that as it may, in the fresh assessment order the assessing officer has verified the details of expenditure capitalized and found them to be genuine. AO has also allowed assessee's claim of depreciation. Thus, in view of the fresh assessment order passed under section 143(3) r.w.s 263 the issues raised in the present appeal are now of mere academic interest. In effect, the present appeal of the assessee having become infructuous, does not require adjudication.

Summary

Issues:
Validity of orders passed by PCIT under section 263 for assessment years 2012-13 and 2014-15.

Analysis:
For the assessment year 2012-13, the assessee, a resident company engaged in infrastructure projects, filed a return declaring a loss. The assessing officer allowed depreciation initially but later disallowed it as the assessee was deemed ineligible. The assessing officer then allowed amortization under a circular. The PCIT, under section 263, set aside the orders, directing verification of expenditure genuineness. The Commissioner (Appeals) later directed to allow depreciation. The fresh assessment order allowed depreciation after verifying the genuineness of the expenditure. The Tribunal found the reassessment not erroneous and dismissed the appeal as infructuous.

For the assessment year 2014-15, a similar scenario unfolded where the assessing officer disallowed depreciation but allowed amortization. The PCIT set aside the assessment order for verification of expenditure genuineness. The Commissioner (Appeals) allowed depreciation, and the fresh assessment order allowed depreciation after verifying the expenditure. The Tribunal applied the same reasoning as in the previous year and dismissed the appeal as infructuous.