2024 (3) TMI 94 - AT - Income Tax

Rectification u/s 154 - under-assessment of income qua the foregoing depreciation/additional depreciation issue(s) - HELD THAT - All the foregoing clinching facts sufficiently indicate that the AO s impugned action invoking sec.154 rectification for the purpose of carrying-out a detailed exercise of re-computing the assessee s depreciation/ additional depreciation could hardly be held as sustainable in law in principle in light of TS Balram, ITO vs. Volkart Bros. 1971 (8) TMI 3 - SUPREME COURT . Their lordship s have settled the law long back that the purpose of sec.154 rectification is to deal with the apparent mistakes on record than carrying-out detailed roving enquiries. This is indeed coupled with the fact that the CIT(A)'s has already termed the impugned rectification as a debatable one which further strengthens the assessee s stand against the applicability of sec. 154 proceedings. We thus see no reason to accept the Revenue s instant sole substantive grievance. Revenue appeal dismissed.

Summary

Issues involved:
The judgment involves the following issues:
1. Allowance of additional depreciation for assessment year 2011-2012.
2. Interpretation of legal provisions regarding additional depreciation u/s. 32(1)(iia) of the Income Tax Act.
3. Claim of additional depreciation on Written Down Value (WDV).
4. Validity of rectification proceedings under sec.154 of the Income Tax Act.

Issue 1: Allowance of additional depreciation for assessment year 2011-2012:
The appellant contested the allowance of additional depreciation for the year in question, arguing that the claim was forgone in previous assessment years and was not permissible under Explanation 5 of the Finance Act. The Revenue challenged the CIT(A)'s decision to allow the additional depreciation. However, the Tribunal found no merit in the Revenue's arguments as the Assessing Officer had initially accepted the depreciation and additional depreciation claims during the regular assessment. The subsequent rectification proceedings initiated by the Assessing Officer were deemed unsustainable as they involved a detailed re-computation of the depreciation claims, contrary to the purpose of sec.154 rectification as established by legal precedent.

Issue 2: Interpretation of legal provisions regarding additional depreciation u/s. 32(1)(iia) of the Income Tax Act:
The Revenue contended that additional depreciation under section 32(1)(iia) should only be allowed for the year in which new machinery or plant is acquired and installed, without the possibility of carrying forward the claim to subsequent years. However, the Tribunal disagreed with this interpretation, emphasizing that the rectification proceedings initiated by the Assessing Officer were based on debatable grounds and went beyond the scope of rectification under sec.154. The Tribunal upheld the CIT(A)'s decision to allow the additional depreciation, considering the legal position and the facts of the case.

Issue 3: Claim of additional depreciation on Written Down Value (WDV):
The appellant raised concerns regarding the claim of additional depreciation on the Written Down Value (WDV), arguing that it should only be allowed on the actual cost of new machinery or plant acquired and installed after a specific date. The Tribunal examined the arguments presented by both parties and concluded that the Assessing Officer's rectification order, which disallowed the additional depreciation claim based on WDV, was not sustainable in law. The Tribunal upheld the CIT(A)'s decision to allow the claim, considering the relevant legal provisions and the circumstances of the case.

Issue 4: Validity of rectification proceedings under sec.154 of the Income Tax Act:
The Tribunal scrutinized the rectification proceedings initiated by the Assessing Officer under sec.154 of the Income Tax Act. It was observed that the rectification involved a detailed re-computation of the depreciation claims, which was deemed inappropriate as per legal principles established by previous court decisions. The Tribunal emphasized that sec.154 rectification is meant to address apparent mistakes on record, rather than conducting extensive inquiries. Given the debatable nature of the rectification and the CIT(A)'s stance on the matter, the Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision.