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2023 (5) TMI 116 - AT - Income TaxRevision u/s 263 - depreciation on goodwill claimed by the amalgamated company - assessee is a amalgamated company and claimed depreciation @ 25% on opening WDV towards intangible asset which represents goodwill created on amalgamation - HELD THAT - In this case, the amalgamating company has not claimed depreciation on goodwill. The assessee company, which is amalgamated company only created goodwill due to amalgamation. Under these facts and circumstances of the case, AO ought to have examined as to how the depreciation is claimed by the amalgamated company, whether the depreciation claimed by the amalgamated company is in accordance with law or not and the Assessing Officer should have been issued notice under section 142(1) of the Act and called for the details and should have examined the issue. The amalgamating company has not claimed any depreciation. The burden cast upon the Assessing Officer to call for the details and examine the same. AO has totally ignored the artificial creation of goodwill for claiming depreciation - By examining entire records of the assessee and after considering the explanations, the ld. PCIT came to the conclusion that the AO has not at all examined the artificially created goodwill by amalgamating company and thus, we are of the opinion that the assessment order passed by the AO is erroneous and prejudicial to the interest of Revenue. Decided against assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Examination of depreciation claim on goodwill created due to amalgamation. 3. Validity of the revision order under section 263 of the Income Tax Act. Summary: Issue 1: Condonation of Delay in Filing the Appeal The assessee filed the appeal with a delay of 161 days, citing reasons such as non-receipt of the order physically and the email being marked as spam. The Tribunal found the reasons satisfactory and condoned the delay, admitting the appeal for adjudication. Issue 2: Examination of Depreciation Claim on Goodwill Created Due to Amalgamation The assessee company claimed depreciation of Rs. 17,41,16,411 on goodwill created due to amalgamation. The Principal Commissioner of Income Tax (PCIT) noted that the goodwill was artificially created and that the amalgamating company had not claimed any depreciation on goodwill. The PCIT concluded that the Assessing Officer (AO) failed to examine this artificially created goodwill, making the assessment order erroneous and prejudicial to the interest of Revenue. The PCIT directed the AO to re-examine the issue. Issue 3: Validity of the Revision Order Under Section 263 of the Income Tax Act The assessee argued that the issue of depreciation on goodwill was covered by the Supreme Court's decision in CIT v. Smifs Securities Limited and that the AO need not make further inquiries. The Tribunal disagreed, stating that it was the AO's duty to examine all issues thoroughly. Since the AO neither called for details nor examined the issue, the PCIT's revision order under section 263 was upheld. The Tribunal dismissed the appeal, affirming that the assessment order was indeed erroneous and prejudicial to the interest of Revenue. Conclusion: The Tribunal upheld the PCIT's order under section 263, directing the AO to re-examine the depreciation claim on goodwill, and dismissed the assessee's appeal. The decision emphasized the AO's duty to thoroughly examine all aspects of the case, even if a higher court's decision appears to cover the issue.
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