2021 (7) TMI 66 - HC - Income Tax

Reopening of assessment u/s 147 - HELD THAT - The assessee filed the return for the Assessment Year 2008-09 on 28.09.2008 and the assessment was completed on 07.12.2010. A notice was issued to the assessee on 21.03.2013 under Section 148 of the Act and thereafter, reasons for re-opening the assessment were supplied to the assessee on 07.05.2013. Therefore, the re-opening of assessment is in accordance with law and the same has been rightly held to be so by the Assessing Officer, Commissioner of Income Tax (Appeals) and the tribunal. Therefore, substantial question of law No.1 is answered against the assessee and in favour of the revenue. Depreciation on ATM - whether tribunal was correct in holding that an ATM which performs the functions of a computer such as input, process and output, could not be considered as a 'Computer' or 'Computer System' or Computer Terminal' or 'Computer Peripheral Device' for the purpose of claiming depreciation under the Act at 60%? - HELD THAT - Issue to be answered in favour of the assessee by a division bench of this court in 'CIT VS. NCR CORPORATION (P) LTD.' 2020 (6) TMI 439 - KARNATAKA HIGH COURT and therefore, for the reasons assigned in the aforesaid judgment, the ATMs are held entitled for depreciation at the rate of 60% as computers. Depreciation u/s 32 on all the assets @ 100% of the assets acquired during the year - procurement of capital assets during the year, ought to have considered furnishing of 73% of the invoices in relation to capital assets acquired during the year as furnishing of substantial evidence relating to capital assets - HELD THAT - The burden undoubtedly is on the assessee who has claimed depreciation by producing the evidence on record viz., the invoices. In the instant case, the assessee had produced 66% of the invoices and therefore, the depreciation to the extent of 66% has been allowed by the Assessing Officer, Commissioner of Income Tax (Appeals) as well as by the tribunal. The assessee has not admittedly produced the invoices in respect of 34% of the claim of depreciation. It is not the case of the assessee that he is not in possession of the invoices. It is pertinent to note that in JAY ENGINEERING WORKS 1978 (2) TMI 94 - DELHI HIGH COURT the books of accounts of the assessee were burnt in fire and therefore, the statutory audit report was accepted as secondary evidence. The law does not provide for statutory presumption in favour of the statutory audit report. The finding of fact on the aforesaid issue has been recorded by all the authorities viz., the Assessing Officer, Commissioner of Income Tax (Appeals) and the tribunal, which is in conformity with Section 37 of the Act. The aforesaid finding cannot be termed as perverse. For the aforementioned reasons, the substantial question of law No.4 is answered against the assessee and in favour of the revenue.

Summary

Issues:
1. Validity of re-assessment proceedings under Section 147 of the Income Tax Act
2. Classification of Automated Teller Machines (ATMs) for claiming depreciation
3. Reliance on Karnataka Sales Tax Act for classification of ATMs
4. Allowance of depreciation on assets based on furnishing of invoices

Issue 1: Validity of re-assessment proceedings under Section 147 of the Income Tax Act:
The appeal questioned the correctness of the Tribunal's decision in upholding the validity of the re-assessment proceedings under Section 147 of the Income Tax Act for the Assessment Year 2008-09. The appellant argued that the necessary requirements under the said provision were not satisfied, and re-assessment proceedings cannot be initiated on the basis of 'borrowed satisfaction' that income chargeable to tax has escaped assessment. However, the Court found that the re-opening of assessment was in accordance with the law, as the notice for re-assessment was issued to the assessee within the statutory timeline, and the reasons for re-opening were duly supplied. Therefore, this issue was answered against the assessee and in favor of the revenue.

Issue 2: Classification of Automated Teller Machines (ATMs) for claiming depreciation:
The second issue revolved around the classification of ATMs as 'computers' for the purpose of claiming depreciation at the rate of 60%. The appellant contended that ATMs perform functions similar to computers and should be considered as such. The Court referred to a previous division bench decision and held that ATMs are entitled to depreciation at the rate of 60% as computers. Therefore, this issue was resolved in favor of the assessee based on the precedent set by the previous judgment.

Issue 3: Reliance on Karnataka Sales Tax Act for classification of ATMs:
The third issue involved the Tribunal's reliance on the Karnataka Sales Tax Act for the classification of ATMs, specifically in the context of the sale of such machines. The appellant argued that the Tribunal should have considered the actual usage of ATMs as mandated under the Income Tax Act, rather than solely relying on the classification under the Sales Tax Act. However, the Court did not delve deeply into this issue as it was already resolved in favor of the assessee based on the classification of ATMs as computers for depreciation purposes.

Issue 4: Allowance of depreciation on assets based on furnishing of invoices:
The final issue pertained to the allowance of depreciation on assets based on the furnishing of invoices. The appellant claimed that the assessee had submitted invoices evidencing the acquisition of 66% of the assets during the year, and therefore, depreciation should be allowed accordingly. However, the Court noted that the assessee failed to produce invoices for 34% of the claimed depreciation. The Court emphasized that the burden of proof lies with the assessee to substantiate the claim for depreciation. Since the assessee did not provide all the invoices, the Court upheld the decision of the authorities in disallowing depreciation on the assets for which invoices were not produced. Therefore, this issue was decided against the assessee and in favor of the revenue.

In conclusion, the Court quashed the tribunal's order in part, specifically regarding the findings on the classification of ATMs for depreciation purposes, holding that ATMs are entitled to depreciation at the rate of 60% as computers. The appeal was disposed of accordingly.